Question

Annie Rasmussen is the owner and operator of Go44, a motivational consulting business. At the end of its accounting period, December 31, 2018, Go44 has assets of $865,080 and liabilities of $273,370. Using the accounting equation and considering each case independently, determine the following amounts.

Required:
a. Annie Rasmussen, capital, as of December 31, 2018.
b. Annie Rasmussen, capital, as of December 31, 2019, assuming that assets increased by $96,500 and liabilities increased by $30,000 during 2019.
c. Annie Rasmussen, capital, as of December 31, 2019, assuming that assets decreased by $168,000 and liabilities increased by $15,000 during 2019.
d. Annie Rasmussen, capital, as of December 31, 2019, assuming that assets increased by $175,000 and liabilities decreased by $18,000 during 2019 .
e. Net income (or net loss) during 2019, assuming that as of December 31, 2019, assets were $880,000, liabilities were $220,000, and there were no additional investments or withdrawals.

Answer 1

a. $591,710

b. $658,210

c. $408,710

d. $784,710

e. $68,290

Step-by-step explanation:

The Accounting Equation is stated as Assets = Equity + Liabilities

also stated as :

Equity = Assets - Liabilities

therefore,

a. Capital = $865,080 - $273,370 = $591,710

b. Capital = $591,710 + [$96,500 - $30,000] = $658,210

c. Capital = $591,710 + [- $168,000 - + $15,000] = $408,710

d. Capital = $591,710 + [$175,000 - - $18,000] = $784,71

e. Net income = [$880,000 - $220,000] - $591,710 = $68,290