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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Cornerstone Exercise 1-15

Using the Accounting Equation

At the beginning of the year, Morgan Company had total assets of $ 425 , 000

and total liabilities of $ 26 0 , 000 .

Required:

Use the fundamental accounting equation to answer the following independent questions:

  1. What is total stockholders' equity at the beginning of the year?
  2. If, during the year, total assets increased by $73,000 and total liabilities increased by $32,000, what is the amount of total stockholders' equity at the end of the year?
  3. If, during the year, total assets decreased by $52,000 and total stockholders' equity increased by $35,000, what is the amount of total liabilities at the end of the year?
  4. If, during the year, total liabilities increased by $85,000 and total stockholders' equity decreased by $73,000, what is the amount of total assets at the end of the year?

To determine

Accounting equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  Assets = Liabilities + Equity

Requirement-1:

To Calculate:

The total stockholder’s equity at the beginning of the year.

Explanation

The total stockholder’s equity at the beginning of the year is calculated as follows:

    Total Assets at the beginning of the year (A) $ 425,000
To determine

Accounting equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  Assets = Liabilities + Equity

Requirement-2:

To Calculate:

The total stockholder’s equity at the End of the year.

To determine

Accounting equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  Assets = Liabilities + Equity

Requirement-3:

To Calculate:

The total Liabilities at the end of the year.

To determine

Accounting equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  Assets = Liabilities + Equity

Requirement-4:

To Calculate:

The total Assets at the end of the year.

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