Question

The following are balance sheet accounts for Blair's Catering:

Accounts payable $5,000
Accounts receivable $4,000
Michael Johnson, Capital $15,000
Cash $1,000
Equipment $10,000
Food supplies $2,000
Prepaid rent $3,000



Based the information above, the total equity of this company is then_________.

Answer 1

The total equity for Blair's Catering is $15,000, which is represented by the Michael Johnson, Capital account on the balance sheet.

Step-by-step explanation:

The total equity for Blair's Catering can be determined from the information provided. Equity is generally calculated as the difference between a company's total assets and its total liabilities. Based on the balance sheet accounts given, to find the total equity we do not sum all the accounts. Instead, we take the reported equity, which in this case is Michael Johnson, Capital. Therefore, the total equity of the company is $15,000.The total equity of Blair's Catering can be calculated by adding the capital to the difference between accounts receivable and accounts payable.

Equity = Capital + (Accounts Receivable - Accounts Payable)

Equity = $15,000 + ($4,000 - $5,000) = $14,000