Question

a. At the beginning of the year, Addison Company’s assets are $300,000 and its equity is $100,000. During the year, assets increase $80,000 and liabilities increase $50,000. What is the equity at year-end?

Answer 1

Equity at the end of the year = $130,000

Step-by-step explanation:

Step 1:

Given ,

Asset of the company at beginning of year = $300,000

Equity  of the company at beginning of year = $100,000

Increase of the assets  during the year = $80,000

Increase of the liabilities  during the year =  $50,000

We need to find the equity at the year end.

Step 2 :

The equity at any point can be obtained by using the formula

equity = assets - liability

At the beginning of the year ,

100,000 = 300,000 - liability

So liability = 300,000 - 100,000 = 200,000

Step 3 :

During the year, assets increase $80,000 and liabilities increase $50,000

So assets at the year end = 300,000 + 80,000 = $380,000

liabilities at the year end = 200,000 + 50,000 = $250,000

Therefore

Equity at the year end = 380,000 - 250,000 = $130,000

Step 4 :

Answer :

Equity at the year end = $130,000