Equity=Common stock+Additional paid-in capital+Retained earnings | ||||||
Equity on Dec 31,2015: | ||||||
$ | ||||||
Initial issue of shares | 400000 | |||||
Dividend on July 1,2014 | (100000*1*20%) | (Note:1) | -20000 | |||
Interest on loan to be paid on Dec 31,2015 | ||||||
(500000*10%) | (Note:2) | -50000 | ||||
Shares issued on May 1,2015 | 100000 | |||||
Dividend on May 1,2015 | (100000+20000)*1*40% | (Note:1) | -48000 | |||
Net income for 2014 | (Note:3) | 250000 | ||||
Net income for 2015 | (Note:3) | 400000 | ||||
Total equity | 1032000 | |||||
Note:1 | ||||||
Dividend reduces retained earnings | ||||||
Note:2 | ||||||
Interest payment reduces retained earnings | ||||||
Note:3 | ||||||
Net income increases retained earnings | ||||||
Answer is | ||||||
c. $ 1032000 | ||||||
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