CFA Level I · CFA Level I Exam · Introduction to Financial Statement Analysis
A company's opening equity was 500, and during the year it reported net income of 80, paid dividends of 30, and issued new shares for 50. It also recognized an unrealized gain of 10 on a fair value through other comprehensive income (FVOCI) equity investment. Closing equity is closest to:
Closing equity is about 610. Start with 500, add net income of 80 and other comprehensive income of 10, subtract dividends of 30, and add 50 of new share capital. Omitting the OCI gain gives 600, and ignoring dividends gives 640.
- A600
- B610Correct
- C640
Explanation
Closing equity = 500 + 80 net income + 10 OCI - 30 dividends + 50 shares = 610. The 600 answer omits the OCI gain. The 640 answer ignores dividends.
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