Question

Tara westmont, the proprietor of tiptoe shoes, had annual revenues of $205,000, expenses of $113,700, and withdrew $26,000 from the business during the current year. the owner's capital account before closing had a balance of $317,000. the ending owner's capital balance after closing is:

Answer 1

$382,300

Step-by-step explanation:

Given:

Annual revenue = $205,000

Annual expenses = $113,700

Withdrew amount = $26,000

Owner capital = $317,000

Computation of net profit :

Net profit = Annual revenue - Annual expenses

Net profit = $205,000 - $113,700

Net profit = $91,300

Computation of owner's capital balance after closing:

Owner's capital balance after closing = Owner capital + Net profit - Withdrew amount

Owner's capital balance after closing = $317,000 + $91,300 - $26,000

Owner's capital balance after closing = $382,300

Answer 2

The ending owner’s capital balance after closing is $382,300.

The company had a net profit for the year of $91,300. This is calculated by subtracting expenses from net income. $205,000-$113,700 = $91,300.

In order to calculate the the ending owner’s capital for the year the accountant will add the net income to the starting owner’s equity, and then subtract the amount that the owner withdrew from the business.

Starting owner’s equity ($317,000 ) + net income ($91,300) = $408,300 and then subtract the amount withdrawn ($26,000) = $382,300, which is the ending owner’s equity balance.