Question

Owner's equity at the start of the period is 35,000; net income for the period is 30,000; the total investments by the owner is 15,000; and total withdrawals by the owner is 5,000. The owner's equity at the end of the period is?

1) 75,000
2) 85,000
3) 80,000
4) 40,000

Answer 1

After calculating the owner's equity by summing the beginning equity, net income, and owner's investments, and then subtracting the owner's withdrawals, the owner's equity at the end of the period would be $75,000. The correct answer is option 1) $75,000.

Step-by-step explanation:

To calculate the owner's equity at the end of the period, we start with the owner's equity at the start of the period and make adjustments based on the activities during the period. The starting equity was $35,000. To this, we add the net income for the period which is $30,000 and the total investments by the owner which is $15,000. Next, we subtract the total withdrawals by the owner which amount to $5,000. These adjustments give us the owner's equity at the end of the period.

So, to summarize:

• Start of period equity: $35,000
• Add: Net income: $30,000
• Add: Owner's investments: $15,000
• Subtract: Owner's withdrawals: $5,000

After these adjustments, the owner's equity at the end of the period would be:

Owner's Equity = Start of Period Equity + Net Income + Owner's Investments - Owner's Withdrawals
Owner's Equity = $35,000 + $30,000 + $15,000 - $5,000
Owner's Equity = $75,000

The correct answer to the question is option 1) $75,000.