Question

Baltimore Company reports total assets and total liabilities of $231,000 and $120,000, respectively, at the conclusion, of its first year of business. The company earned $79,500 during the first year, and distributed $28,000 to shareholders as dividends. How much did shareholders initially invest in the business?

Answer 1

Answer:

The $59,500 should shareholders initially invest in the business

Explanation:

Total Assets = Total Liabilities + shareholder equity

The computation of the invested amount by shareholder is shown below:

Total assets = Total Liabilities + shareholder equity

where, Shareholder equity = Shareholders invested + earnings - dividend paid

Now put these values to the above formula

So, the value would equal to

$2,31,000 = $1,20,000 + Shareholders invested + $79,500 - $28,000

$2,31,000 = $1,71,500 + Shareholders invested

Shareholders invested = $2,31,000 - $1,71,500

   = $59,500