Question

The company has net income of $30,000 for the year and paid dividends of $40,000. At the beginning of the year, the company had common stock of $50,000, paid-in surplus of $60,000, and retained earnings of $70,000. At the end of the year, the firm had total equity of $170,000. What is the amount of the net new equity raised during the year?

Answer 1

opening total equity;

common stock	50,000
paid in surplus	60,000
retained earnings	70,000
opening total equity	180,000

closing retained earnings;

opening retained earnings	70,000
add; net income	30,000
less;dividends	(40,000)
closing retained earnings	60,000

amount of net new equity = (closing total equity - closing retained earnings) - (opening total equity- opening retained earnings)

=> ($170,000-60,000) - ($180,000-70,000)

=>110,000-110,000

=>0.

The amount of net new equity raised is nil.