Chapter 1, Problem 2APSA

To determine

Concept introduction:

Asset: A resource which will generate a cash flow in a future for an individual, company or corporation is known as an asset. It will have an economic value and helps to reduce expenses, benefits the firm’s operations and improve sales. An asset is mentioned on the credit side of the balance sheet.

Liabilities: During the course of the business operations, an obligation or the company’s debit that arises is called liabilities. Mortgages, accounts payables, accrued expenses; loans are recorded on the right hand side of the balance sheet.

Account Payables: For delivered goods or services, the cash owed by the business which they need to pay to their suppliers is called account payables. In the balances sheet, the account payables are shown as liabilities.

Equity: Equity is the value of an asset less the amount of all liabilities on that asset. It can be represented with the accounting equation: Assets -Liabilities = Equity.

(1) To find: The equity and liabilities of company A

Explanation of Solution

Formula:

  $Equity=Assets–liabilities$

1. The Amount of Equity on December 31,2016 is

  $\$55,000-\$24,500=\$30,500$

2. The Amount of Liabilities on December 31,2017 is

  $\$30,500+\$6,000+\$8,500-\$3,500=\$41,500$

3. The Amount of Equity on December 31,2017 is

  $\$58,000-\$41,500=\$16,500$

To determine

Concept introduction:

Asset: A resource which will generate a cash flow in a future for an individual, company or corporation is known as an asset. It will have an economic value and helps to reduce expenses, benefits the firm’s operations and improve sales. An asset is mentioned on the credit side of the balance sheet.

Liabilities: During the course of the business operations, an obligation or the company’s debit that arises is called liabilities. Mortgages, accounts payables, accrued expenses; loans are recorded on the right hand side of the balance sheet.

Account Payables: For delivered goods or services, the cash owed by the business which they need to pay to their suppliers is called account payables. In the balances sheet, the account payables are shown as liabilities.

(2)To find: The equity and liabilities of company B and also its net income

Explanation of Solution

Formula:

  $\begin{array}{l}\\ 1. NetIncome=ClosingEquity-OpeningEquity-Ownerinvestments\text{ + }Ownerscashwithdrawals \end{array}$

  $2Equity=Assets–liabilities$

1. The Amount of Equity on December 31, 2016 is

  $\$34,000-\$21,500=\$12,500$

2. The Amount of Equity on December 31,2017 is

  $\$40,000-\$26,500=\$13,500$

3. The Amount of Net Income for year 2017 is

  $\$13,500-\$12500-\$1,400+\$2,000=\$1600$

To determine

Concept introduction:

Asset: A resource which will generate a cash flow in a future for an individual, company or corporation is known as an asset. It will have an economic value and helps to reduce expenses, benefits the firm’s operations and improve sales. An asset is mentioned on the credit side of the balance sheet.

Liabilities: During the course of the business operations, an obligation or the company’s debit that arises is called liabilities. Mortgages, accounts payables, accrued expenses; loans are recorded on the right hand side of the balance sheet.

Account Payables: For delivered goods or services, the cash owed by the business which they need to pay to their suppliers is called account payables. In the balances sheet, the account payables are shown as liabilities.

(3) To find: The amount of assets for company C on December 31, 2017

Explanation of Solution

  $\begin{array}{l}OpeningEquity=\$24,000–\$9,000=\$15,000\hfill \\ ClosingEquity=\$15,000+\$9,750+\$8,000-\$5,875=\$26,875\hfill \\ Assets=\$26,875+\$29,000=\$55,875\hfill \end{array}$

To determine

Concept introduction:

Asset: A resource which will generate a cash flow in a future for an individual, company or corporation is known as an asset. It will have an economic value and helps to reduce expenses, benefits the firm’s operations and improve sales. An asset is mentioned on the credit side of the balance sheet.

Liabilities: During the course of the business operations, an obligation or the company’s debit that arises is called liabilities. Mortgages, accounts payables, accrued expenses; loans are recorded on the right hand side of the balance sheet.

(4) To find: The computation of the amount of investment for company D during the year 2017

Explanation of Solution

  $\begin{array}{l}Openingequity=\$60,000-\$40,000=\$20,000\hfill \\ Closingequity=\$85000-\$24000=\$61,000\hfill \\ Amountofinvestment=ClosingEquity-OpeningEquity-NetIncome+Withdrawals\hfill \\ \$61,000-\$20,000-\$14,000=\$27,000\hfill \end{array}$

To determine

Concept introduction:

Asset: A resource which will generate a cash flow in a future for an individual, company or corporation is known as an asset. It will have an economic value and helps to reduce expenses, benefits the firm’s operations and improve sales. An asset is mentioned on the credit side of the balance sheet.

Liabilities: During the course of the business operations, an obligation or the company’s debit that arises is called liabilities. Mortgages, accounts payables, accrued expenses; loans are recorded on the right hand side of the balance sheet.

(5) To find: The computation of the amount of liabilities for company E on December 31, 2016

Explanation of Solution

  $\begin{array}{l}ClosingEquity=\$113,000-\$70,000=\$43,000\hfill \\ OpeningEquity=ClosingEquity-Ownerinvestments-Netincome+Ownercashwithdrawals\hfill \\ \$43,000-\$6,500-\$20,000+\$11,000=\$27,500\hfill \\ LiabilitiesforDec.312016=Assets–Equity=\$119,000-\$27,500=\$91,500\hfill \end{array}$