Updating shareholders' equity with year's profit Steps:

• Calculate opening shareholders' equity: ordinary share capital $40,000 + retained earnings$65,000 = $105,000.
• Add profit for the year $40,000 to retained earnings.
• Closing shareholders' equity remains $145,000 (dividends paid reduce assets and equity equally, but here focus on equity update via profit).
• Debentures excluded as they are a liability, not equity.

Why B is correct:

• Shareholders' equity formula: share capital + closing retained earnings (opening retained earnings + profit for the year).

Why the others are wrong:

• A adds debentures $30,000 to equity total.
• C subtracts half the dividends or misapplies adjustment.
• D includes debentures and ignores partial profit update.

Final answer: B