acctg problem #3 HEEEEEEEEEEEELPPP?

Question

12. C Company had total liabilities and total stockholders’ equity at the end of 2005 of $200,000 and $300,000, respectively. During 2006, C Company’s net income was $200,000, and it declared and paid dividends of $100,000. At the end of 2006, C Company’s total liabilities were $300,000. C Company’s total assets at the end of 2006 were:
A) $700,000.
B) $800,000.
C) $900,000.
D) $500,000.
E) $600,000.

i put E and answer is A, what did i do wrong?

Answer 1

$ 300000 End of 2005 Equity
$ 200000 Plus: 2006 Net Income
($100000) Less: 2006 Dividends
$ 400000 Equals: End of 2006 Equity

Again, By Rule: Assets = Liabilites + Equity
Assets = $300,000 + $400,000
Assets = $700,000

Great, now I am having other flashbacks to college.......

Answer 2

The explanation above is correct. Your Net Income of $200,000 increases your stockholder's equity to $500,000 then you need to account for the dividends of $100,000 which reduces stockholder's equity to $400,000. Your liabilities increased in 2006 to $300,000. So stockholder's equity of $400,000 + liabilities of $300,000 equals $700,000, your assets have to equal $700,000.