Question

The following information was taken from the records of Silver Hill Corporation:                             &nbsp

The following information was taken from the records of Silver Hill Corporation:

                                    Total assets, beginning of the year                                         $25,000

                                    Total liabilities, beginning of the year                                        9,000

                                    Dividends declared and paid during the year                        7,500

                                    Total assets, end of the year                                                     27,000

                                    Total liabilities, end of the year                                                    9,500

                                    Revenues earned during the year                                           11,000

                                    Stock issued during the year                                                         2,500

                  What were Silver Hill’s total expenses for the year?

                  a.              $4,500

                  b.              $6,500

                  c.               $8,500

                  d.              $17,500

                  e.              none of the above

Business   Accounting   
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Answer #1

Stockholder’s equity at the beginning of the year

= Total assets, beginning of the year - Total liabilities, beginning of the year

= $25,000 - $9,000

= $16,000

Stockholder’s equity at the end of the year

= Total assets, end of the year - Total liabilities, end of the year

= $27,000 - $9,500

= $17,500

Now,

Opening Stockholder’s equity + Stock issued during the year + Net Income - Dividends declared and paid during the year = Closing Stockholder’s equity

So, $16,000 + $2,500 + Net Income - $7,500 = $17,500

So, Net Income = $17,500 + $7,500 - $16,000 - $2,500

= $6,500

Now,

Net Income = Total Revenues – Total Expenses

So, $6,500 = $11,000 - Total Expenses

So, Total Expenses = $11,000 - $6,500

= $4,500

So, as per above calculations, option a is the correct option

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