Chapter 1, Problem 2BPSB

REQUIREMENT 1

To determine

To calculate:

We have to calculate the following for company V -

1. Amount of equity on December 31, 2014.
2. Amount of equity on December 31, 2015.
3. Amount of net income/loss for the year 2015.

Answer to Problem 2BPSB

Solution:

1. Amount of equity for the company V on December 31,2014 is $29,000
2. Amount of equity for the company V on December 31,2015 is $23,000
3. Amount of net/income for the year 2015 is $5500.

Explanation of Solution

Explanation:

1. As per accounting equation, total amount of asset is equivalent to the sum of total liabilities and equity.
Therefore, equity will be calculated as follows-

Particulars	Amount ($)
Asset	54000
Less: liabilities	25000
Equity on December 31, 2014	$29000

2. As per accounting equation, total amount of asset is equivalent to the sum of total liabilities and equity.
Therefore, equity will be calculated as follows-

Particulars	Amount ($)
Asset	59000
Less: liabilities	36000
Equity on December 31, 2015	$23,000

3. Calculation of net income/loss for the year 2015.

Particulars	Amount ($)
Equity on December 31,2015	23,000
Add: owner cash withdrawal	5,500
Less:
Equity on December 31,2014	29,000
Owner investment	5000
Net loss	5500

REQUIREMENT 2

To determine

To calculate:

We have to calculate the following for company W -

1. Amount of equity on December 31, 2014.
2. Amount of equity on December 31, 2015.
3. Amount of liabilities on December 31, 2015

Answer to Problem 2BPSB

Solution:

1. Amount of equity for the company W on December 31,2014 is $20,000
2. Amount of equity for the company W on December 31,2015 is $78,000
3. Amount of liabilities on December 31, 2015 is $22,000.

Explanation of Solution

Explanation:

1. Calculation of amount of equity on December 31,2014

Particulars	Amount ($)
Asset	80,000
Less: liabilities	60,000
Equity on December 31, 2014	$20,000

2. Calculation of amount of equity on December 31,2015

Particulars	Amount ($)
Equity on December 31, 2014	20,000
Add: net income	40,000
Owner investment	20,000
Less: owner cash withdrawal	2,000
Equity on December 31, 2015	$78,000

3. Calculation of amount of liabilities on December 31, 2015

Particulars	Amount ($)
Assets on December 31,2015	100,000
Less: Equity on December 31, 2015	78,000
Liabilities on December 31, 2015	$22,000

REQUIREMENT 3

To determine

To calculate:

Answer to Problem 2BPSB

We have to calculate the owner investment for company X during 2015.

Solution

The owner investment for company X during 2015 is $29,200

Explanation of Solution

Explanation:

Firstly, amount of equity will be calculated for both years.

Particulars	Amount ($)
Asset	141,500
Less: liabilities	68,500
Equity on December 31, 2014	$73,000

Particulars	Amount ($)
Asset	186500
Less: liabilities	65800
Equity on December 31, 2015	$120,700

Calculation of owner investment for company X during 2015.

Particulars	Amount ($)
Equity on December 31,2015	120,700
Add: owner cash withdrawal	0
Less:
Equity on December 31,2014	73,000
Net income	18,500
Owner investment	$29,200

REQUIREMENT 4

To determine

To calculate:

Answer to Problem 2BPSB

We have to calculate the amount of asset for company Y on December 31, 2015.
Solution

The amount of asset for company Y on December 31, 2015 is $135,100.

Explanation of Solution

Explanation:

Calculation of amount of equity on December 31, 2014

Particulars	Amount ($)
Asset	92,500
Less: liabilities	51,500
Equity on December 31, 2014	$41,000

Calculation of amount of equity on December 31,2015

Particulars	Amount ($)
Equity on December 31, 2014	41,000
Add: net income	24,000
Owner investment	48,100
Less: owner cash withdrawal	20,000
Equity on December 31, 2015	$93,100

1. Calculation of amount of asset for Company Y on December 31, 2015

Particulars	Amount ($)
Equity on December 31, 2015	93,100
Add: Liabilities on December 31, 2015	$42,000
Asset on December 31, 2015	$135,100

REQUIREMENT 5

To determine

To calculate:

Answer to Problem 2BPSB

We have to calculate the amount of liabilities for company Z on December 31, 2014.
Solution

The amount of liabilities for company Z on December 31, 2014 is $100,000.

Explanation of Solution

Explanation:

Calculation of amount of equity on December 31, 2015

Particulars	Amount ($)
Asset	170,000
Less: liabilities	42,000
Equity on December 31, 2015	$128,000

Calculation of amount of equity on December 31, 2014

Particulars	Amount ($)
Equity on December 31, 2015	128,000
less: net income	32,000
Owner investment	60,000
Add : owner cash withdrawal	8,000
Equity on December 31, 2014	$44,000

1. Calculation of amount of liabilities for Company Z on December 31, 2014

Particulars	Amount ($)
Asset on December 31, 2014	$144,000
Less: Equity on December 31, 2014	44,000
Liabilities on December 31, 2014	$100,000