Chapter 1, Problem 2APSA

To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  $\text{Assets = Liabilities + Equity}$

Requirement 1a.

The amount of Equity on December 31, 2018 for Company A

Answer to Problem 2APSA

The amount of Equity on December 31, 2018 for Company A is $30,500

Explanation of Solution

The amount of Equity can be calculated by subtracting Assets and liabilities =55,000-24500 = $30,500.

To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  $\text{Assets = Liabilities + Equity}$

Requirement 1b.

The amount of Equity on December 31, 2019 for Company A

Answer to Problem 2APSA

The amount of Equity on December 31, 2019 for Company A is $41,500

Explanation of Solution

The amount of Equity can be calculated using the formula as follows:

Equity = Equity beginning balance + Owner's investment + Net income −Owner's withdrawals =30500 +6000+8500-3500 = $41,500.

To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  $\text{Assets = Liabilities + Equity}$

Requirement 1c.

The amount of Liabilities on December 31, 2019 for Company A

Answer to Problem 2APSA

The amount of Liabilities on December 31, 2019 for Company A is $16,500

Explanation of Solution

The amount of Liabilities can be calculated using the formula as follows:

Liabilities = Assets − Equity = 58000-41500 =$16,500

To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  $\text{Assets = Liabilities + Equity}$

Requirement 2a.

The amount of Equity on December 31, 2018 for Company B

Answer to Problem 2APSA

The amount of Equity on December 31, 2018 for Company B is $12,500

Explanation of Solution

The amount of Equity can be calculated by subtracting Assets and liabilities =34500-21500 = $12,500.

To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  $\text{Assets = Liabilities + Equity}$

Requirement 2b.

The amount of Equity on December 31, 2019 for Company B

Answer to Problem 2APSA

The amount of Equity on December 31, 2019 for Company B is $13,500

Explanation of Solution

The amount of Equity can be calculated by subtracting Assets and liabilities =40000-26500 = $13,500.

To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  $\text{Assets = Liabilities + Equity}$

Requirement 2c.

The Net Income for the year 2019 for Company B

Answer to Problem 2APSA

The Net Income for the year 2019 for Company B is $1,600

Explanation of Solution

The Net Income for the year 2019 for Company B is calculated as follows:

Ending Equity balance = Equity beginning balance + Owner's investment + Net income −Owner's withdrawals

13500 = 12500+1400+ Net Income -2000

13500 =Net Income +11900

Net Income = 13500-11900 = $1,600

To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  $\text{Assets = Liabilities + Equity}$

Requirement 3.

The amount of assets for Company C as on December 31, 2019

Answer to Problem 2APSA

The amount of assets for Company C as on December 31, 2019 is $55,875

Explanation of Solution

The amount of assets for Company C as on December 31, 2019 is calculated as follows:

Equity as on Dec. 31, 2018 = Assets − Liabilities = 24000-9000 = $15,000

Equity as on Dec. 31, 2019 = Equity beginning balance + Owner's investment + Net income −Owner's withdrawals= 15000+9750+8000-5875 = $26,875

Assets as on Dec. 31, 2019 = Liabilities + Equity = 29000+26875 = $55,875

To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  $\text{Assets = Liabilities + Equity}$

Requirement 4.

The amount of owner's investment for Company D during the year 2019

Answer to Problem 2APSA

The amount of owner's investment for Company D during the year 2019 is $27,000

Explanation of Solution

The amount of owner's investment for Company D during the year 2019 is calculated as follows:

Equity as on Dec. 31, 2018 = Assets − Liabilities = 60000-40000 = $20,000

Equity as on Dec. 31, 2019 = Assets − Liabilities = 85000-24000 = $61,000

Now,

Ending Equity = Equity beginning balance + Owner's investment + Net income −Owner's withdrawals

61000 =20000+ Owner's investment+14000-0

61000 =34000+ Owner's investment

Hence,

Owner's investment = 61000-34000 = $27,000

To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  $\text{Assets = Liabilities + Equity}$

Requirement 5.

The amount of Liabilities for Company E as on December 31, 2019

Answer to Problem 2APSA

The amount of Liabilities for Company E as on December 31, 2019 is $91,500

Explanation of Solution

The amount of Liabilities for Company E as on December 31, 2019 is calculated as follows:

Equity as on Dec. 31, 2019 = Assets − Liabilities = 113000-70000 = $43,000

Now,

Ending Equity = Equity beginning balance + Owner's investment + Net income −Owner's withdrawals

43000= Equity beginning balance+6500+20000-11000

43000 = Equity beginning balance+15500

Equity beginning balance = 43000-15500 = $27,500

Now,

Liabilities for Company E as on December 31, 2019 = Assets − Equity = 119000-27500 = $91,500