Question

Precision Camera Services started the year with total assets of​ $120,000 and total liabilities of​ $40,000. The company is a sole proprietorship. The revenues and the expenses for the year amounted to​ $140,000 and​ $50,000, respectively. During the​ year, there were no new capital contributions and the owner withdrew​ $45,000. What is the amount of​ owner's equity at the end of the​ year?

Answer 1

Answer:

$125,000

Explanation:

Opening values of;

Total assets =​ $120,000

Total liabilities = $40,000

Total equity = $120,000 - $40,000 = $80,000

During the year,

Total revenues = $140,000

Total expenses = $50,000

Withdrawal by owner = $45,000

The amount withdrawn by the owner reduces the owners equity. This may be deducted from the net income.

Net income from the year = $140,000 - $50,000 - $45,000

                                           = $45,000

This will be added to the opening owner's equity to get the closing owner's equity.

Owner's equity at the end of the​ year = $80,000 + $45,000  

                                                               = $125,000