Question

The summaries of balance sheet and income statement data follow.

Beginning of year:
Total assets $ 85,000
Total liabilities 62,000
Total owner’s equity ?

End of year:
Total assets 110,000
Total liabilities ?
Total owner’s equity 60,000

Changes during year in owner’s equity:
Investments by owner ?
Drawings 18,000
Total revenues 175,000
Total expenses 140,000

Required: Calculate the missing items above.

Answer 1

Total owner’s equity = $23,000

Total liabilities =$50,000

Investment by owner = $20,000

Step-by-step explanation:

We use the accounting equation which is presented below:

Total assets = Total liabilities + owners equity

At the beginning of the year

The owner equity would be

= Total assets - total liabilities

= $85,000 - $62,000

= $23,000

At the end of the year

The total liabilities would be

= Total assets - total owners equity

= $110,000 - $60,000

= $50,000

The investment by owner would be

= Ending balance of owners equity + drawing - opening balance of owners equity + total expenses - total revenues

= $60,000 + $18,000 - $23,000 + $140,000 - $175,000

= $20,000