Question

Inspirational Inc. is a motivational consulting business. At the end of its accounting period, October 31, 20Y2, Inspirational has assets of $5,250,000 and liabilities of $1,600,000. Using the accounting equation and considering each case independently, determine the following amounts: a. Stockholders' equity as of October 31, 20Y2. $ 3,650,000 b. Stockholders’ equity as of October 31, 20Y3, assuming that assets increased by $800,000 and liabilities increased by $330,000 during 20Y3. $ 4,120,000 c. Stockholders' equity as of October 31, 20Y3, assuming that assets decreased by $600,000 and liabilities increased by $140,000 during 20Y3. $ 2,910,000 d. Stockholders' equity as of October 31, 20Y3, assuming that assets increased by $440,000 and liabilities decreased by $90,000 during 20Y3. $ 4,180,000 e. Net income (or net loss) during 20Y3, assuming that as of October 31, 20Y3, assets were $6,140,000, liabilities were $1,950,000, and no additional common stock was issued or dividends paid. Net income $

Answer 1

a. Stockholders' equity as of October 31, 20Y2 is $3,650,000. b. Stockholders' equity as of October 31, 20Y3 is $4,120,000. c. Stockholders' equity as of October 31, 20Y3 is $2,910,000. d. Stockholders' equity as of October 31, 20Y3 is $4,180,000. e. Net income during 20Y3 is $3,590,000.

Step-by-step explanation:

a. To determine stockholders' equity, subtract liabilities from assets: Stockholders' equity = Assets - Liabilities. Therefore, Stockholders' equity as of October 31, 20Y2 is $5,250,000 - $1,600,000 = $3,650,000.

b. Given that assets increased by $800,000 and liabilities increased by $330,000 during 20Y3, we can calculate Stockholders' equity as of October 31, 20Y3: Stockholders' equity = (Assets + Increase) - (Liabilities + Increase). So, Stockholders' equity = ($5,250,000 + $800,000) - ($1,600,000 + $330,000) = $4,120,000.

c. Considering the decrease in assets and increase in liabilities during 20Y3, we can calculate Stockholders' equity: Stockholders' equity = (Assets - Decrease) - (Liabilities + Increase). Thus, Stockholders' equity = ($5,250,000 - $600,000) - ($1,600,000 + $140,000) = $2,910,000.

d. With the given increase in assets and decrease in liabilities during 20Y3, we can calculate Stockholders' equity: Stockholders' equity = (Assets + Increase) - (Liabilities - Decrease). Therefore, Stockholders' equity = ($5,250,000 + $440,000) - ($1,600,000 - $90,000) = $4,180,000.

e. To calculate net income, we need to consider the change in stockholders' equity. Net income = Assets - Liabilities - Stockholders' equity.

Answer 2

a.Stockholders equity as at October 31, 20Y2.

Equity = $3,650,000

b. Stockholders equity as at October 31, 20Y3

Equity = $4,120,000

c. Stockholders equity as at October 31, 20Y3.

Equity = $2,910,000

d.Stockholders equity as at October 31, 20Y3.

Equity = $4,180,000

e. Net Income as at October 2OY3

Net Income = $540,000

Step-by-step explanation:

Accounting equation equate asset with liabilities and equity:

Assets = Liaibilities + Equity.

With this formula, any of the missing value can be derived mathematically.

To get equity, the item will be rearranged as follows:

Equity = Asset - Liabilities

a. Stockholders equity as at October 31, 20Y2.

Equity = $5,250,000 - $1,600,000

Equity = $3,650,000

b. Stockholders equity as at October 31, 20Y3

Increase in asset of $800,000 and increase in liabilities of $330,000

Equity = ($5,250,000 +$800,000) - ($1,600,000 + $330,000)

Equity = $6,050,000 - $1,930,000

Equity = $4,120,000

c. Stockholders equity as at October 31, 20Y3.

Assuming that assets decreased by $600,000 and liabilities increased by $140,000

Equity =( $5,250,000 - $600,000) - ($1,600,000 + $140,000)

Equity = $4,650,000 - $1,740,000

Equity = $2,910,000

d. Stockholders equity as at October 31, 20Y3.

assuming that assets increased by $440,000 and liabilities decreased by $90,000

Equity = ($5,250,000+$440,000) - ($1,600,000 -$90,000)

Equity = $5,690,000 - $1,510,000

Equity = $4,180,000

e. Net Income as at October 2OY3

Net income (or net loss) during 20Y3, assuming that as of October 31, 20Y3, assets were $6,140,000, liabilities were $1,950,000, and no additional common stock was issued or dividends paid

Net income = Closing equity - opening equity.

Closing equity:

= $6,140,000 - $1,950,000

= $4,190,000

Opening equity as at October 31, 20Y2 = $3,650,000

Net Income = $4,190,000 -$3,650,000

Net Income = $540,000