Question

At the end of the current year, the owners' equity in Barclay Bakery is $246,000. During the year, the assets of the business had increased by $120,000 and the liabilities had increased by $72,000. Owners' equity at the beginning of the year must have been _________.

Answer 1

The owners' equity at the beginning of the year can be calculated by subtracting the net increase in equity from the ending equity. The net increase is the increase in assets minus the increase in liabilities. For Barclay Bakery, the beginning owners' equity was $198,000.

Step-by-step explanation:

To calculate the owners' equity at the beginning of the year for Barclay Bakery, we need to consider the changes in assets and liabilities over the year and understand how these changes affect owners' equity. The accounting equation states that Assets = Liabilities + Owners' Equity. This means that any change in assets, minus any change in liabilities, is equal to the change in owners' equity.

According to the information provided, by the end of the current year, the owners' equity is $246,000. The assets increased by $120,000 and liabilities increased by $72,000 during the year. Therefore, at the beginning of the year, the owners' equity would have been the ending equity minus the net increase in equity. This net increase is calculated as the increase in assets minus the increase in liabilities ($120,000 - $72,000 = $48,000). Subtracting this from the ending equity ($246,000 - $48,000), we find that the owners' equity at the beginning of the year must have been $198,000.