Fill in the Blank Questions: Basic Accounting Equation and Changes to Owners Equity
Q: 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
A:Beginning of year: If Assets = Owners Equity + Liabilities then Owners Equity = Assets - Liabilities = $85,000 - $62,000 = $23,000 Owners Equity
End of year: If Assets = Owners Equity + Liabilities then Liabilities = Assets - Owners Equity = $110,000 - $60,000 = $50,000 Liabilities
Changes during year in owner’s equity: For this final part of the question we need to reconstruct the statement of owners equity or basically how equity at the end of the year is calculated starting with equity at the beginning of the year plus/minus changes during the year.
Opening Balance $23,000 Investments by owner ? Drawings -$18,000 Total revenues +$175,000 Total expenses -$140,000 Closing Balance $60,000
Let's put this in a formula: Closing Balance = Opening Balance + Investments - Drawings + Revenues - Expenses Switching that around we get: Investments = Closing Balance - Opening Balance + Drawings - Revenues + Expenses = $60,000 - $23,000 + $18,000 - $175,000 + $140,000 = $20,000 Investments