Question

At the beginning of the year, morales company had total assets of $845,000 and total liabilities of $532,000. (treat each item independently.) (a) if total assets increased $150,000 during the year and total liabilities decreased $75,000, what is the amount of stockholders' equity at the end of the year?

Answer 1

Calculation of amount of stockholders' equity at the end of the year;

We can calculate the amount of stockholders' equity at the end of the year with the help of following formula:

Stockholders' equity at the end of the year = Total Assets at the end of the year – Total Liabilities at the end of the year

At the beginning of the year, Morales Company had total assets of $845,000 and total assets increased $150,000 during the year. Hence Total Assets at the end of the year shall be (845000+150000) = $995,000

At the beginning of the year, Morales Company had total liabilities of $532,000 and total liabilities decreased $75,000 during the year. Hence Total Liabilities at the end of the year shall be (532000-75000) = $457,000

Now we can calculate:

Stockholders' equity at the end of the year = Total Assets at the end of the year – Total Liabilities at the end of the year

= 995000-457000 = $538,000

Hence, Stockholders' equity at the end of the year is $538,000