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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Statement of owner’s equity

Financial information related to Udder Products Company, a proprietorship, for the month ended April 30, 2016, is as follows:

Net income for April $166,000
Mark Kominksy’s withdrawals during April 25,000
Mark Kominksy’s capital, April 1, 2016 384,500
  1. a. Prepare a statement of owner's equity for the month ended April 30, 2016.
  2. b. Why is the statement of owner's equity prepared before the April 30, 2016, balance sheet?

a)

To determine

Statement of owners’ equity:

This statement reports the final balance of owner’s equity for a particular period of time, after certain adjustments like additional capital, net income from income statement and drawings. This statement is prepared after the income statement.

Balance sheet:

This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

To prepare: Statement of owner's equity of Company UP for the month ended April 30, 2016.

Explanation

Prepare statement of owner's equity of Company UP for the month ended April 30, 2016.

Company UP
Statement of Owner's Equity
For the month ended April 30, 2016
MK Capital, April 1, 2016   $384,000
Net income ...

b)

To determine

To explain: the reason for preparing the statement of owner's equity before preparing the balance sheet.

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