Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total stockholders' equity at the end of the year?

Question

Franco Cole

Business

30 November, 22:42

Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total stockholders' equity at the end of the year?

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Allyson · Answer 1

Answer: $33,000

Explanation: In simple words, stockholders equity is that amount of assets in the company, that is not financed by a liability. Thus, we can say that it is the difference between the assets and liabilities of the business.

It can be computed using following formula : -

stockholders equity = issuance of common stock + net income - dividend paid

= $30,000 + $8,000 - $5,000

= $33,000