   Chapter 1, Problem 2E

Chapter
Section
Textbook Problem

Determine the following amounts: a. The amount of the liabilities of a business that has $60,800 in assets and in which the owner has$34,500 equity. b. The equity of the owner of a tour bus that cost $57,000 and on which is owed$21,800 on an installment loan payable to the bank. c. The amount of the assets of a business that has $11,780 in liabilities and in which the owner has$28,500 equity.

a.

To determine

Solve for liabilities using accounting equation, if assets are $60,800 and owners’ equity are$34,500.

Explanation

Accounting equation: Accounting equation is a concept expressed in the form of equation, which creates a relation between resources or assets of a company and claims of resources to creditors and owners. Fundamental accounting equation is expressed as shown below:

Assets = Liabilities + Owners' Equity

Solve for liabilities using accounting equation, if assets are $60,800 and owners’ equity are$34,500

b.

To determine

Solve for owners’ equity using accounting equation, if assets (cost of tour bus) are $57,000, and liabilities (accounts payable) are$21,800.

c.

To determine

Solve for assets using accounting equation, if liabilities are $11,780 and owners’ equity are$28,500.

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