Equity unchanged by non-equity transactions

Steps:

• Identify initial share capital as $900,000 (total value of ordinary shares).
• Add retained earnings: $900,000 +$450,000 = $1,350,000 initial equity.
• Issuing $100,000 bank loan adds equal assets (cash) and liabilities, leaving equity at$1,350,000.
• Loaning $50 each to shareholders (amount unspecified) shifts assets (cash to receivables), leaving equity at$1,350,000.

Why B is correct:

• Equity equals share capital plus retained earnings per accounting equation; loans affect assets/liabilities only, not equity.

Why the others are wrong:

• A: Subtracts loan amount, ignoring loans do not reduce equity.
• C: Adds shares and loan without basis, as no new shares issued.
• D: Adds only loan to initial equity, treating debt as equity.

Final answer: B