Question

Ecord the transactions in the accounting equation for Year 2. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide the appropriate titles for these accounts in the last column of the table.

As of December 31, Year 2, determine the total amount of assets, liabilities, and stockholders’ equity and present this information in the form of an accounting equation.

What is the amount of total assets, liabilities, and stockholders’ equity as of January 1, Year 3?

Answer 1

BETTER CORP.

Event Assets = Liabilities + Stockholders’ Equity Accounting Titles

for Retained

Earnings

Cash + Land = Notes + Common + Retained

Payable Stock Earnings

Balance

1/1/Yr 1 20,000 30,000 13,000 8,000 29,000

1. (10,000) 10,000

2. 35,000 35,000

3. 74,000 74,000 Service Revenue

4. (41,000) (41,000) Operating exp.

5. 20,000 20,000

6. (10,000) (10,000)

7. N/A N/A N/A

b. Balance 31/12

Yr 2 88,000 + 40,000 = 33,000 + 43,000 + 52,000

c. The amount of total assets as of January 1, Year 3 = $128,000; liabilities = $33,000; and stockholders' equity = $95,000.

Step-by-step explanation:

The accounting equation states that total assets are equal to total liabilities and stockholders' equity. This equation gives accounting two sides to every transaction. This is known as the double-entry system of accounting. And the two sides are always in agreement before and after each transaction. The equation also implies that an entity's assets are funded by the creditors and the owners (stockholders).