Packard Company Engaged in the Following Transactions During Year 1

question 58

Multiple Choice

Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.) 1) Acquired $950 cash from the issue of common stock.2) Borrowed $420 from a bank.3) Earned $650 of revenues.4) Paid expenses of $250.5) Paid a $50 dividend. During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.) 1) Issued an additional $325 of common stock.2) Repaid $220 of its debt to the bank.3) Earned revenues of $750.4) Incurred expenses of $360.5) Paid dividends of $100.
What is the amount of total stockholders' equity that will be reported on Packard's balance sheet at the end of Year 1?

• A)$1,350
• B)$900
• C)$250
• D)$1,300

---

Definitions:

Third-party Claims

Third-party claims involve demands for compensation or legal action brought by someone who is not a direct party to a contract, usually in liability or insurance cases.

Insurance

A contract by which an insurance company, the insurer, promises to pay a sum of money or give something of value to another, either the insured or the beneficiary, to compensate for a specified loss.

Concurrent Property Ownership

Ownership of property by two or more parties at the same time, where each party has an undivided interest in the whole property.

Subrogation

The legal process by which one party steps into the shoes of another party, to pursue their rights against a third party, usually in insurance claims.