Question

Lee Chan, owner of the China Wine Bar, had $40,000 in liabilities and $160,000 in stockholders' equity for 20×1. In 20×2, the assets increasaed by $20,000 and the liabilities increase by $5,000. Thus, the stockholders' equity in 20×2 is:

A) $15,000
B) $45,000
C) $175,000
D) $200,000

Answer 1

The stockholders' equity in 20×2 is $175,000.

Step-by-step explanation:

In 20×1, Lee Chan had $40,000 in liabilities and $160,000 in stockholders' equity. In 20×2, the assets increased by $20,000 and the liabilities increased by $5,000. To calculate the stockholders' equity in 20×2, we need to subtract the liabilities from the total assets. So, $160,000 (stockholders' equity in 20×1) + $20,000 (increase in assets) - $5,000 (increase in liabilities) = $175,000.