Chapter 1, Problem 1.16E

To determine

Introduction:

Accounting Equation is the mathematical equation that shows the relation between assets, liabilities and stockholders’ equity. It is expressed as:

Accounting Equation

Figure (1)

To determine: The missing amounts of Corporation W and G Enterprises.

Answer to Problem 1.16E

Record the missing amounts of Corporation W and G Enterprises.

Title: Missing amounts
Particulars	Corporation W	G Enterprises
Beginning of year:
Total assets	$110,000	$150,000
Total liabilities	$70,000	$80,000 (4)
Total stockholders’ equity	$40,000(1)	$70,000
End of year:
Total assets	$180,000(2)	$180,000
Total liabilities	$120,000	$55,000
Total stockholders’ equity	$60,000	$125,000(5)
Changes during year in retained earnings:
Dividends	$30,000(3)	$5,000
Total revenues	$215,000	$140,000(6)
Total expenses	$165,000	$80,000

Table (1)

Explanation of Solution

Calculate the amount of stockholders’ equity at the beginning of the year.

Given information: The amount of total assets and total liabilities at the beginning of the year is $110,000 and $70,000 respectively.

Calculation:

$\begin{array}{c}\begin{array}{l}\text{Stockholders' equity at the}\\ \text{beginning of the year}\end{array}\}=\left[\begin{array}{l}\text{Total assets at the beginning of the year }-\\ \text{Total liabilities at the beginning of the year}\end{array}\right]\\ =\text{\$110,000}-\text{\$70,000}\\ =\text{\$40,000}\end{array}$ (1)

Hence, the amount of stockholders’ equity at the beginning of the year of Corporation W is $\boxed{\$40,000}$.

Calculate the amount of total assets at the end of the year.

Given information: Total liabilities and total stockholders’ at the end of the year is $120,000 and $60,000 respectively.

$\begin{array}{c}\begin{array}{l}\text{Total assets at the }\\ \text{end of the year}\end{array}\}=\left[\begin{array}{l}\text{Total liabilities at the end of the year}+\text{Total}\\ \text{stockholders' equity at the end of the year}\end{array}\right]\\ =\$120,000+\$60,000\\ =\$180,000\end{array}$ (2)

Hence, the total assets of Corporation W at the end of the year are $\boxed{\$180,000}$.

Calculate the amount of dividends.

Given information: Total revenue and total expenses is $215,000 and $165,000 respectively.

Step 1: Determine the amount of net income.

$\begin{array}{c}\text{Net income = Total revenues}-\text{Total expenses}\\ \text{=\$215,000}-\$165,000\\ =\$50,000\end{array}$

Step 2: Determine the amount of change in stockholders’ equity.

$\begin{array}{c}\text{Increase in stockholders' equity = }\left[\begin{array}{l}\text{Stockholders' equity at the end of the year }-\\ \text{Stockholders' equity at the beginning of the year}\end{array}\right]\\ =\$60,000-\$40,000\\ =\$20,000\end{array}$

Step 3: Determine the amount of dividends.

$\begin{array}{c}\text{Dividends}=\text{Net income }-\text{Increase in shareholders' equity}\\ =\text{\$50,000}-\$20,000\\ =\$30,000\end{array}$ (3)

Hence, the amount of dividends is $\boxed{\$30,000}$.

Calculate the amount of total liabilities at the beginning of the year.

Given information: Total assets and total stockholders’ equity is $150,000 and $70,000 respectively.

Calculation:

$\begin{array}{c}\begin{array}{l}\text{Total liabilities at the}\\ \text{beginning of the year}\end{array}\}=\left[\begin{array}{l}\text{Total assets at the beginning of the year }-\\ \text{Stockholders' equity at the beginning of the year}\end{array}\right]\\ =\text{\$150,000}-\text{\$70,000}\\ =\text{\$80,000}\end{array}$ (4)

Hence, the amount of total liabilities at the beginning of the year of G Enterprises is $\boxed{\$80,000}$.

Calculate the amount of total stockholders’ equity at the end of the year.

Given information: Total assets and total liabilities at the end of the year is $180,000 and $55,000 respectively.

Calculation:

$\begin{array}{c}\begin{array}{l}\text{Total stockholders' equity }\\ \text{at the end of the year}\end{array}\}=\left[\begin{array}{l}\text{Total assets at the end of the year}-\\ \text{Total liabilities at the end of the year}\end{array}\right]\\ =\$180,000-\$55,000\\ =\$125,000\end{array}$ (4)

Hence, the total stockholders’ equity of G enterprises at the end of the year is $\boxed{\$125,000}$.

Calculate the amount of revenue.

Step 1: Determine the amount of change in stockholders’ equity.

$\begin{array}{c}\text{Increase in stockholders' equity = }\left[\begin{array}{l}\text{Stockholders' equity at the end of the year }-\\ \text{Stockholders' equity at the beginning of the year}\end{array}\right]\\ =\$125,000-\$70,000\\ =\$55,000\end{array}$

Step 2: Determine the amount of total revenues.

$\begin{array}{c}\text{Dividends = Net income }-\text{Increase in shareholders' equity}\left(\text{Or}\right),\\ \text{Dividends = Total revenue }-\text{Total expenses}-\text{Increase in stockholders' equity}\\ \text{\$5,000 = Total revenue}-\$80,000-\$55,000\\ \text{Total revenue}=\$5,000+\$80,000+\$55,000\\ =\$140,000\end{array}$ (5)

Hence, total revenue earned by G Enterprises during the year is $\boxed{\$140,000}$.

Note:

All the changes in amount of stockholders’ equity are caused by changes in retained earnings.