Question

Brief exercise 1-9 at the beginning of the year, morales company had total assets of $816,000 and total liabilities of $526,000. (treat each item independently.) (a) if total assets increased $178,000 during the year and total liabilities decreased $82,000, 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:

At the beginning of the year, Morales Company had total assets of $816,000 and total assets increased $178,000 during the year, hence Total Assets at the end of the year shall be 816000+178000 = $994,000

At the beginning of the year, Morales Company had total liabilities of $526,000 and total liabilities decreased $82,000 during the year. Hence Total Liabilities at the end of the year shall be 526000-82000 = $444,000

Now we can calculate amount of stockholders' equity at the end of the year as follows:

Equity = Assets – Liabilities

= 994,000-444,000

= $550,000

Hence, the amount of stockholders' equity at the end of the year shall be $550,000