Week 4 – Assignment 2: Analyze Statement of Changes in Equity

Consider Southeast Home Care, which is a for-profit business. In 2020, its net income was $1,500,000 and it distributed $500,000 to owners in the form of dividends. Its beginning-of-year equity balance was $12,000,000. Use this information and the income statement located in this week’s Assignment 1 resources to construct the business’s statement of changes in equity. What is the ending 2020 value of the business’s equity?

Length: Submit your answer on one EXCEL worksheet.

The completed assignment should address all of the assignment requirements, exhibit evidence of concept knowledge, and demonstrate thoughtful consideration of the content presented in the course.

To construct the Statement of Changes in Equity for Southeast Home Care in Excel, follow these steps:

1. Open Excel and create a new worksheet.
2. Label the columns as follows:
   • Column A: “Description”
   • Column B: “Beginning Balance”
   • Column C: “Net Income”
   • Column D: “Dividends”
   • Column E: “Ending Balance”
3. Fill in the rows with the relevant information:
   • Row 1: “Common Equity”
   • Row 2: “Beginning of Year”
     • In cell B2, input the beginning-of-year equity balance: $12,000,000
   • Row 3: “Net Income”
     • In cell C3, input the net income for 2020: $1,500,000
   • Row 4: “Dividends”
     • In cell D4, input the dividends distributed: -$500,000 (as it’s an outflow)
   • Row 5: “End of Year”
     • In cell E5, use the formula “=B2+C3+D4” to calculate the ending balance of equity.
4. Your completed Excel worksheet should look something like this:

5. Calculate the ending balance by using the formula provided in cell E5.
6. The ending value of the business’s equity for 2020 will be displayed in cell E5.

This statement will provide a clear overview of how the equity of Southeast Home Care changed throughout the year, considering the net income earned and dividends distributed.