Before you begin:For purposes of testing and exams it's important to make sure you not only get the questions right but are completing them at the right speed. Use a watch or clock to time yourself for this exercise.
Difficulty Rating: Beginner --> Intermediate
Time limit: 8 minutes
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
For this final part of the question we need to reconstruct the statement of owners equity or basically how owners 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
To solve this problem we're going to take the statement of owners equity with all the figures above and put them in a formula: