Question

Fritz Evans is the owner and operator of Be-The-One, a motivational consulting business. At the end of its accounting period, December 31, 2018, Be-The-One has assets of $395,000 and liabilities of $97,000. Using the accounting equation, determine the following amounts:

a. Owner’s equity as of December 31, 2018.
b. Owner’s equity as of December 31, 2019, assuming that assets decreased by $65,000 and liabilities increased by $36,000 during 2019.

Answer 1

Balance of Stockholder's Equity

a. $298,000

b. $197,000

Step-by-step explanation:

We know general accounting equation is as follows:

Assets = Liabilities + Stockholder's Equity

Provided year end balances,

Assets = $395,000

Liabilities = $97,000

a. Therefore, Stockholder's Equity = $395,000 - $97,000 = $298,000

b. In case assets decrease by $65,000 in 2019 then revised value of assets = $395,000 - $65,000 = $330,000

Increase in liabilities = $36,000, thus balance of liabilities at year end 2019 = $97,000 + $36,000 = $133,000

Therefore, Assets = Liabilities + Stockholder's Equity

$330,000 = $133,000 + Stockholder's Equity

$330,000 - $133,000 = $197,000 = Stockholder's Equity

Balance of Stockholder's Equity

a. $298,000

b. $197,000