Question

On January 1, Year 3, Wayfarer Co.'s assets were $365,000 and its stockholders' equity was $153,000. During the year, assets increased $21,500 and liabilities decreased $23,000. Required: Determine the amount of stockholders' equity at December 31, Year 3.

Answer 1

Stockholders' equity at December 31, Year 3 is determined to be $197,500. This is calculated by adding the initial equity to the net increase in assets and decrease in liabilities over the year.

Step-by-step explanation:

The calculation of stockholders' equity at the end of Year 3 can be determined using the basic accounting equation: Assets = Liabilities + Stockholders' Equity. We know that at the start of the year, Wayfarer Co. had assets of $365,000 and stockholders' equity of $153,000. During the year, assets increased by $21,500 and liabilities decreased by $23,000.

To find the stockholders' equity at the end of the year, we adjust the initial equity balance by the change in assets and liabilities. The new value of assets at year-end is $365,000 (beginning assets) + $21,500 (increase in assets) = $386,500. Given that liabilities decreased, this change will directly increase stockholders' equity. So, the change in equity is the increase in assets of $21,500 plus the decrease in liabilities of $23,000, totaling $44,500.

The new stockholders' equity is $153,000 (initial equity) + $44,500 (change in equity) = $197,500 at December 31, Year 3.

Answer 2

$197,500

Step-by-step explanation:

The computation is shown below:

As we know that

Total assets = Total liabilities + stockholder equity

$365,000 = Total liabilities + $153,000

So, the total liabilities is $212,000

Now if the assets is increased $21,500 and liabilities is decreased $23,000

So, the stockholder equity is

$365,000 + $21,500 = $212,000 - $23,000 + stockholder equity

$386,500 = $189,000 + stockholder equity

So, the stockholder equity is $197,500