Question

started with total assets of and total liabilities of . At the end of ​, total assets stood at and total liabilities were . Requirements 1. Did the​ stockholders' equity of increase or decrease during ​? By how​ much? 2. Identify the four possible reasons that​ stockholders' equity can change. Requirement 1. Did the​ stockholders' equity of increase or decrease during ​? By how​ much? ​(Enter a decrease with a minus sign or​ parentheses.) Change in stockholders' equity during the year is

Answer 1

1. Assets = Equity + Liability

Equity = Assets - Liability

Opening Equity = 14,000 - 9,000

= $5,000

Closing Equity = 19,000 - 11,000

= $8,000

Increase ( Decrease) = 8,000 - 5,000

= Increased by $3,000

2. Four ways Equity can change.

• Equity will increase if Common Stock is issued
• Equity will increase if the company makes a profit ( Net Income ) as this will go to the Equity account as Retained earnings
• Equity will decrease if the company pays Dividends as those are paid from retained earnings
• Equity will decrease if there is a net loss.