Question

The Baldwin Company currently has the following balances on their balance sheet: Total Assets \$239,562 Total...

The Baldwin Company currently has the following balances on their balance sheet: Total Assets \$239,562 Total Liabilities \$148,310 Retained Earnings \$35,008 Suppose next year the Baldwin Company generates \$44,200 in net profit, pays \$12,000 in dividends, total assets increase by \$55,000, and total liabilities remain unchanged. What will ending Baldwins balance in Common Stock be next year?
Select: 1
\$375,664
\$79,044
\$477,880
\$143,444

Step 1: Calculate the amount of Common Stock in previous year.

Common Stock = Total Assets - Total Liabilities - Retained Earnings

Common Stock = \$239,562 - \$148,310 - \$35,008

Common Stock = \$56,244

Step 2: Calculate New Retained Earnings & Total Assets (This year)

New Retained Earnings = Retained Earnings (last year) + Net Profit - Dividend paid

New Retained Earnings = 35,008 + 44,200 - 12,000

New Retained Earnings = \$67,208

Total Assets (this year) = Assets last year + 55,000 = 239,562 + 55,000

Total Assets (this year) = \$294,562

Step 3: Calculate the Common stock amount next year.

Common Stock = Total Assets (this year) - Liabilities - New Retained Earnings

Common Stock = \$294,562 - \$148,310 - \$67,208

Common Stock = \$79,044

Second Option (\$79,044) is the answer.

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