menu
bartleby
search
close search
Hit Return to see all results
close solutoin list

Accounting equation Inspirational Inc. is a motivational consulting business. At the end of its accounting period, October 31, 20Y2, Inspirational has assets of $5,250,000 and liabilities of $1,600,000. Using the accounting equation and considering each case independently, determine the following amounts: a. Stockholders’ equity as of October 31, 20Y2. b. Stockholders’ equity as of October 31, 20Y3, assuming that assets increased by $800,000 and liabilities increased by $330,000 during 20Y3. c. Stockholders’ equity as of October 31, 20Y3, assuming that assets decreased by $600,000 and liabilities increased by $140,000 during 20Y3. d. Stockholders’ equity as of October 31, 20Y3, assuming that assets increased by $440,000 and liabilities decreased by $90,000 during 20Y3. e. Net income (or net loss) during 20Y3, assuming that as of October 31, 20Y3, assets were $6,140,000, liabilities were $1,950,000, and no additional common stock was issued or dividends paid.

BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

Solutions

Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 1, Problem 7E
Textbook Problem
1423 views

Accounting equation

Inspirational Inc. is a motivational consulting business. At the end of its accounting period, October 31, 20Y2, Inspirational has assets of $5,250,000 and liabilities of $1,600,000. Using the accounting equation and considering each case independently, determine the following amounts:

a. Stockholders’ equity as of October 31, 20Y2.

b. Stockholders’ equity as of October 31, 20Y3, assuming that assets increased by $800,000 and liabilities increased by $330,000 during 20Y3.

c. Stockholders’ equity as of October 31, 20Y3, assuming that assets decreased by $600,000 and liabilities increased by $140,000 during 20Y3.

d. Stockholders’ equity as of October 31, 20Y3, assuming that assets increased by $440,000 and liabilities decreased by $90,000 during 20Y3.

e. Net income (or net loss) during 20Y3, assuming that as of October 31, 20Y3, assets were $6,140,000, liabilities were $1,950,000, and no additional common stock was issued or dividends paid.

To determine

Calculate the required amounts for Company I, using the accounting equation.

Explanation of Solution

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

Assets = Liabilities + Stockholder’s Equity

a.

Calculate the stockholder's equity for Company I as of October 31, 20Y2:

Stockholder’s Equity =  Assets - Liabilities=  $5,250,000 - $1,600,000=  $3,650,000

Hence, the stockholder's equity of Company I as on October 31, 20Y2 is $3,650,000.

b.

Calculate the stockholder's equity of Company I as on October 31, 20Y3, assuming assets increased by $800,000 and liabilities increased by $330,000 during 20Y3.

Assets = Assets of 20Y2 + increase in 20Y3= $5,250,000+800,000=$6,050,000

Liabilities = Liabilities of 20Y2 + increase in 20Y3=$1,600,000+330,000=$1,930,000

Stockholder’s  Equity =  AssetsLiabilities=  $6,050,000$1,930,000=  $4,120,000

Hence, the stockholder's equity of Company I as on October 31, 20Y3 is $4,120,000.

c.

Calculate the stockholder's equity of Company I as on October 31, 20Y3, assuming assets decreased by $600,000 and liabilities increased by $140,000 during 20Y3:

Assets = Assets of 20Y2 + decrease in 20Y3= $5,250,000600,000=$4,650,000

Liabilities = Liabilities of 20Y2 + increase in 20Y3=$1,600,000+140,000=$1,740,000

Stockholder’s Equity =  AssetsLiabilities=  $4,650,000$1,740,000=  $2,910,000

Hence, the stockholder's equity of Company I as on October 31, 20Y3 is $2,910,000

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 1 Solutions

Financial And Managerial Accounting
Show all chapter solutions
add
Ch. 1 - Cost principle On June 25, Ritts Roofing extended...Ch. 1 - Accounting equation Be-The-One is a motivational...Ch. 1 - Transactions Interstate Delivery Service is owned...Ch. 1 - Income statement The revenues and expenses of...Ch. 1 - Statement of stockholders equity Using the income...Ch. 1 - Balance sheet Using the following data for...Ch. 1 - Statement of cash flows A summary of cash flows...Ch. 1 - Ratio of liabilities to stockholders equity The...Ch. 1 - Types of businesses The following is a list of...Ch. 1 - Professional ethics A fertilizer manufacturing...Ch. 1 - Business entity assumption Ozark Sports sells...Ch. 1 - Accounting equation The total assets and total...Ch. 1 - Accounting equation The total assets and total...Ch. 1 - Accounting equation Determine the missing amount...Ch. 1 - Accounting equation Inspirational Inc. is a...Ch. 1 - Asset, liability, and stockholders equity items...Ch. 1 - Effect of transactions on accounting equation What...Ch. 1 - Effect of transactions on accounting equation A. A...Ch. 1 - Effect of transactions on stockholders equity...Ch. 1 - Transactions The following selected transactions...Ch. 1 - Nature of transactions Teri West operates her own...Ch. 1 - Net income and dividends The income statement for...Ch. 1 - Net income and stockholders equity for four...Ch. 1 - Balance sheet items From the following list of...Ch. 1 - Income statement items Based on the data presented...Ch. 1 - Statement of stockholders equity Financial...Ch. 1 - Income statement Imaging Services was organized on...Ch. 1 - Missing amounts from balance sheet and income...Ch. 1 - Balance sheets, net income Financial information...Ch. 1 - Financial statements Each of the following items...Ch. 1 - Statement of cash flows Indicate whether each of...Ch. 1 - Statement of cash flows A summary of cash flows...Ch. 1 - Financial statements We-Sell Realty was organized...Ch. 1 - Transactions On April 1 of the current year,...Ch. 1 - Financial statements The assets and liabilities of...Ch. 1 - Financial statements Seth Feye established...Ch. 1 - Transactions; financial statements On August 1,...Ch. 1 - Transactions; financial statements DLite Dry...Ch. 1 - Missing amounts from financial statements The...Ch. 1 - Transactions Amy Austin established an insurance...Ch. 1 - PR 1-2 B Financial statements The assets and...Ch. 1 - Financial statements 1. Net income: 10,900 Jose...Ch. 1 - Transactions; financial statements 2. Net income:...Ch. 1 - Transactions; financial statements Bevs Dry...Ch. 1 - Missing amounts from financial statements The...Ch. 1 - Peyton Smith enjoys listening to all types of...Ch. 1 - Compare Amazon.com to Best Buy Amazon.com, Inc....Ch. 1 - Analyze The Home Depot for three years The Home...Ch. 1 - Analyze Lowes for three years Lowes Companies,...Ch. 1 - Compare The Home Depot and Lowes Using your...Ch. 1 - Compare Papa Johns and Yum! Brands The following...Ch. 1 - Business versus personal expenses Marco Brolo is...Ch. 1 - Loan from bank Colleen Fernandez, president of...Ch. 1 - Communication There are two common causes of...Ch. 1 - Net income On January 1, 20Y5, Dr. Marcie Cousins...Ch. 1 - Transactions and financial statements for a...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
What are the disadvantages of a corporation?

Foundations of Business (MindTap Course List)

What are the four types of control activities?

College Accounting, Chapters 1-27

Why do companies purchase securities of other corporations?

Intermediate Accounting: Reporting And Analysis

Describe the differences between process costing and job-order costing.

Managerial Accounting: The Cornerstone of Business Decision-Making

Suppose you were comparing a discount merchandiser with a high-end merchandiser. Suppose further that both comp...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)