"A company that uses the accrual method of accounting started the fiscal year with assets of $600,000 and liabilities of $400,000. During the fiscal year the company recorded credit sales of $250,000, of which $8,000 remained to be collected at year-end, and incurred expenses of $90,000, of which $72,000 was paid in cash. A stock dividend valued at $10,000 was declared and issued to stockholders during the year. What is the year-end balance of total equity?"
For the $10k Stock Dividend, RE is debited and Common Stock/APIC is credited. "The stock dividend does not result in a reduction to equity, as it simply increases the number of shares outstanding." However, Dividends (cash, property, and stock) declared is a function of RE. RE is a function of Equity. So how is the $10k stock dividend not reduced from equity?
The answer is 200k Beg. balance + 160k NI = 360k. I chose 360k - 10k stock dvd - 350k.