Question

Ohn Joos is the owner and operator of Personality Shine LLC, a motivational consulting business. At the end of its accounting period, December 31, 2013, Personality Shine has assets of $775,000 and liabilities of $186,000. Using the accounting equation, determine the following amounts:

a. Owner's equity as of December 31, 2013. $
b. Owner's equity as of December 31, 2014, assuming that assets decreased by $147,000 and liabilities decreased by $45,000 during 2014. $

Answer 1

John Joos's owner's equity at the end of 2013 is $589,000. Assuming assets decreased by $147,000 and liabilities decreased by $45,000 through 2014, his equity at the end of 2014 is $487,000.

Step-by-step explanation:

To determine owner's equity, we can use the basic accounting equation:

• 
  
• Assets = Liabilities + Owner's Equity

For December 31, 2013:

Given assets of $775,000 and liabilities of $186,000, we can rearrange the equation to solve for owner's equity:

• 
  
• Owner's Equity = Assets - Liabilities
• 
  
• Owner's Equity = $775,000 - $186,000
• 
  
• Owner's Equity = $589,000

John Joos's owner's equity at the end of 2013 is $589,000.

For December 31, 2014:

Assuming during 2014, assets decreased by $147,000 and liabilities decreased by $45,000, the new values are:

• 
  
• New Assets = $775,000 - $147,000 = $628,000
• 
  
• New Liabilities = $186,000 - $45,000 = $141,000

Now, let's recalculate the owner's equity:

• 
  
• Owner's Equity = New Assets - New Liabilities
• 
  
• Owner's Equity = $628,000 - $141,000
• 
  
• Owner's Equity = $487,000

John Joos's owner's equity at the end of 2014 is $487,000.