Question

At the end of its first month of operations, Michael's Consulting Services reported net income of $27,100. They also had account balances of: Cash, $19,400; Office Supplies, $2,350 and Accounts Receivable $10,700. The sole stockholder’s total investment in exchange for common stock for this first month was $5,350. There were no dividends in the first month.

Calculate the amount of total equity to be reported on the balance sheet at the end of the month.

Answer 1

32,450

Step-by-step explanation:

The primary accouting equation we need the keep in mind is that:

Asset = Liabilities + Equity

Asset = Liabilities + Paid-in capital + Retained earnings

Asset = Liabilities + Paid-in capital + Net income - Dividend

Puttting all the number together, we have:

19,400 + 2,350 + 10,700 = 0 + 5,350 + 27,100 - 0 (TRUE). We need to do this step to make sure that aour assumption that Liabilities = 0 is correct.

So, Total equity at the of the month is 5,350 + 27,100 = 32,450.