Question

Using the expanded accounting equation, calculate and enter the answers for each question. You will need to use the answers you calculate for beginning and ending equity to answer the rest of the questions.
Assets Liabilities

Beginning of Year: $29,000 $16,000

End of Year: $63,000 $29,000

1) What is the equity at the beginning of the year? 13000

2) What is the equity at the end of the year? 34000

3) If the company issues common stock of $5,500 and pay dividends of $36,700, how much is net income (loss)? Net Income (Loss) (21000)

4) If net income is $1,000 and dividends are $8,100, how much is common stock? Common Stock

5) If the company issues common stock of $16,700 and net income is $18,000, how much is dividends? Dividends

6) If the company issues common stock of $41,100 and pay dividends of $1,600, how much is net income (loss)? Net Income (Loss)

Answer 1

Solution:

Answer for 1. and 2. :

Particulars                Assets     liabilities  owner's equity

Beginning capital           29000            16000            13000

Ending capital           63000            29000           34000

3. Beginning capital     13000

    add new stock              5500

      Add : Income                 ?

          Sub total                 ?

      Less: Dividend      36700

     Closing Capital      34000

By inserting the last two numbers of the sentence you will determine the "Subtotal." : 36700+34000 = 70700

We learn from the top of the document that the equity of the investor at the outset was $13,000 and the shareholding of $5500 was released. Therefore, when calculating net income, we have $18,500.

Now , Net income =70700-18500=$ 52,200

4. Closing Capital+Dividend =Common stock +net income

                                                =34000+8100

                                               =Common stock +1000

Then common stock = $ 41,100

5. Closing Capital + Dividend = Opening capital +Common stock issued +net income

34000+dividend =13000+16700+18000  

Dividend = $13700

6. Closing Capital + Dividend = Opening capital +Common stock issued +net income

=34000+1600 =13000+41100+ net income or loss

Net loss=$ 18500

Expanded accounting Equation for a corporation is :

Assets = Liabilities + Paid-in Capital + Revenues – Expenses – Dividends – Treasury Stock