Redfox Pest Control Service had revenues of $425,000 and expenses of $338,000 for the current year, ended June 30. At the beginning of the year, the common stock was $110,000 and the retained earnings was $70,000. During the year, shareholders purchased an additional $25,000 in stock. Dividends of $16,750 were paid. What is the balance of stockholders' equity at the end of the year?

A) $292,000
B) $267,250
C) $205,250
D) $275,250

Question

Jayesh Khadke · Accepted Answer

Final Answer : D, Explanation :  The formula for calculating the end-of-year balance for stockholders' equity is:Beginning common stock + additional stock purchased during the year - dividends paid + retained earningsBeginning common stock = $110,000Additional stock purchased during the year = $25,000Dividends paid = $16,750Retained earnings = Revenues - Expenses - DividendsRetained earnings = $425,000 - $338,000 - $16,750Retained earnings = $70,250Therefore, the end-of-year balance for stockholders' equity is:$110,000 + $25,000 - $16,750 + $70,250= $275,250The correct answer is D, $275,250.

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