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 retained earnings to answer the rest of the questions.
Assets Liabilities
Beginning of Year: $29,000 $16,000
End of Year: $63,000 $29,000

Required:
a. What is the equity at the beginning of the year? 13000
b. What is the equity at the end of the year? 34000
c. If the company issues common stock of $5,500 and pay dividends of $36,700, how much is net income (loss)?

Answer 1

Answer:

a. $13,000

b. $34,000

c. $10,200

Explanation:

a. Calculation to determine the equity at the beginning of the year

Asset = Liabilities + Equity

$29000 = $16000 + Equity

Equity=$29,000-$16,000

Equity = $13,000

Therefore the equity at the beginning of the year is $13,000

b. Calculation to determine the equity at the end of the year

Asset = Liabilities + Equity

$63000 = $29000 + Equity

Equity = $63000-$29,000

Equity=$34,000

c. Calculation to determine how much is net income (loss)

Opening Equity + Issued common stock – dividend + Net income = Closing Equity

$13,000 + $36,700 - $5,500 + Net income = $34,000

$44,200+ Net income = $34,000

Net income=$44,200-$34,000

Net income=$10,200

Therefore the net income is $10,200