Question

Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of 185,000, expenses of103,700, and withdrew 18,000 from the business during the current year. The owner's capital account before closing had a balance of297,000. The ending owner's capital balance after closing is:

1) $185,000
2) $63,300
3) $81,300
4) $360,300
5) $378,300

Answer 1

Tara Westmont's ending owner's capital balance after closing is $360,300, calculated by adding the net income of $81,300 to the beginning owner's capital of $297,000 and subtracting her withdrawals of $18,000.

Step-by-step explanation:

To find the ending owner's capital balance after closing for Tara Westmont's business, Tiptoe Shoes, we follow the accounting equation for owner's equity, which adds net income to the beginning owner's equity and subtracts withdrawals.

The net income is calculated by subtracting the expenses from the revenues:

• Net Income = Revenues - Expenses = $185,000 - $103,700 = $81,300

Now, we update the owner's equity:

• Ending Owner's Capital Balance = Beginning Owner's Capital + Net Income - Owner's Withdrawals
• Ending Owner's Capital Balance = $297,000 + $81,300 - $18,000
• Ending Owner's Capital Balance = $360,300

Therefore, the ending owner's capital balance is $360,300.