Question

Tremonti, Inc., is obligated to pay its creditors $9,200 during the year. a. What is the value of the shareholders’ equity if assets equal $10,900? b. What is the value of the shareholders’ equity if assets equal $8,500?

Answer 1

Answer:

a. Assets equal $10,900, Shareholders' Equity: $1,700

b. Assets equal $8,500, Shareholders' Equity: -$700

The company losses and does not remain Shareholders' Equity

Explanation:

Basing on the balance sheet equation:

Assets = Liabilities + Shareholders' Equity

Shareholders' Equity  = Assets - Liabilities

In Tremonti, Inc., the company is obligated to pay its creditors $9,200 during the year, therefore Liabilities are $9,200

a. Assets equal $10,900

Shareholders' Equity = $10,900 - $9,200 = $1,700

b. Assets equal $8,500

Shareholders' Equity = $8,500 - $9,200 = -$700

The company losses and does not remain Shareholders' Equity