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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Accounting equation

Fritz Evans is the owner and operator of Be-The-One, a motivational consulting business. At the end of its accounting period, December 31, 2015, Be-The-One has assets of $395,000 and liabilities of $97,000. Using the accounting equation, determine the following amounts:

  1. a. Owner’s equity as of December 31, 2015.
  2. b. Owner’s equity as of December 31, 2016, assuming that assets decreased by $65,000 and liabilities increased by $36,000 during 2016.

(a)

To determine

Accounting equation

Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a company and claims of resources by creditors and owners. Accounting equation is expressed as shown below:

Assets = Liabilities + Owners' Equity

To solve: For owners’ equity as of December 31, 2015, using accounting equation

Explanation

Solve for owners’ equity using accounting equation, if total assets is $395,000, and total liabilities is $97,000.

Assets = Liabilities + Owners' Equity$395,000 = $97,000 + Owners' Equity</

(b)

To determine

To solve: For owners’ equity as of December 31, 2016, using accounting equation

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