Question

Astoria Company had the following transactions during the month of August Year 1:

(1) Cash received from bank loans was $20,000.
(2) Dividends of $9,500 were paid to stockholders in cash.
(3) Revenues earned and received in cash amounted to $33,500.
(4) Expenses incurred and paid were $26,000.


At the beginning of August, Year 1, owners' equity in Astoria was $160,000. Given the transactions of August, what will be the owners' equity be at the end of the month?

Answer 1

The owners' equity of Astoria Company at the end of August, Year 1, will be $158,000. This is calculated by starting with the initial equity of $160,000.

Step-by-step explanation:

The owners' equity of Astoria Company at the end of August, Year 1, can be determined by adjusting the beginning equity for the transactions during the month. The initial owners' equity is given as $160,000. First, cash received from bank loans is not an owners' equity transaction since it is a liability.

Next, the company paid dividends of $9,500, which reduces owners' equity. Revenue earned in the amount of $33,500 increases owners' equity. Lastly, the company incurred $26,000 in expenses, decreasing owners' equity. Calculating the changes provides us with the new equity balance:

Owners' Equity, beginning balance: $160,000. Add: Revenue earned: $33,500. Less: Dividends paid: $9,500. Less: Expenses incurred: $26,000. The calculation is as follows: $160,000 + $33,500 - $9,500 - $26,000 = $158,000. Therefore, the owners' equity at the end of August, Year 1, will be $158,000.