Question

On January 1 of the current year, Jimmy's Sandwich Company reported stockholders’ equity totaling $132,000. During the current year, total revenues were $114,000 while total expenses were $103,500. Also, during the current year paid $38,000 in cash dividends. No other changes in equity occurred during the year. If, on December 31 of the current year, total assets are $214,000, the change in total stockholders’ equity during the year was: Multiple Choice An increase of $82,000 A decrease of $48,500. A decrease of $27,500. An increase of $27,500. An increase of $48,500.

Answer 1

Correct answer--- --- A decrease of $27,500

Calculation

Beginning balance of Stockholder's equity		$    1,32,000.00
Net income (114000-103500)	$     10,500.00
Cash dividend	$   (38,000.00)
Total change in Stockholder's equity		$      (27,500.00)
Ending balance of Stockholder's equity		$    1,04,500.00

There is reduction in shareholder's equity because dividend distributed is more than income earned.