Question

The following information is provided for Sacks Company before closing entries. Cash $ 12,000 Supplies 4,500 Prepaid rent 2,000 Salaries expense 4,500 Equipment 65,000 Service revenue 30,000 Miscellaneous expenses 20,000 Dividends 3,000 Accounts payable 5,000 Common stock 68,000 Retained earnings 8,000 What is the amount of total shareholders’ equity? Multiple Choice a. $5,000. b. $78,500. c. $68,500. d. $83,500.

Answer 1

Answer:

b. $78,500

Explanation:

Assets

Equipment                       $65,000

Cash                                 $12,000

Supplies                           $4,500

Prepaid rent                     $2,000

Total Assets                     $83,500

Equity and Liabilities

Common stock                $68,000

Retained earnings           $10,500

Total Equity                      $78,500

Accounts payable            $5,000

Total Equity and Liability $83,500

*Working

Net Profit = Service revenue - Salaries Expenses - Miscellaneous expenses

Net Profit = $30,000 - $4,500 - $20,000 = $5,500

Total retained Earning = $8,000 + $5,500 - $3,000 = $10,500