Basic Accounting Equation Question
by Trina Brown
Before you begin: For purposes of exams and testing it's important to make sure you not only answer the questions correctly but are completing them at the right speed. Be sure to use a watch or clock to time yourself for this exercise.
Lynn Shackelford is the owner and operator of Galaxy LLC, a motivational consulting business.
At the end of its accounting period, December 31, 2023, Galaxy has assets of $823,000 and liabilities of $198,000.
Using the accounting equation, determine the following amounts:
Owner's equity, as of December 31, 2024, assuming that assets increased by $156,000 and liabilities increased by $48,000 during 2024.
The accounting equation is:
ASSETS = LIABILITIES + OWNER’S EQUITY
So, for the year ended 2024:
Assets = $823,000 + $156,000 = $979,000 (1)
Liabilities = $198,000 + $48,000 = $246,000 (2)
Owner’s Equity = Assets - Liabilities
Owner’s Equity = $979,000 - $246,000
Owner’s Equity = $733,000
The Owner’s Equity as of December 31, 2024 is $733,000 (3)
That's it! Hope you enjoyed our basic accounting equation question.
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All the best in your studies!
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