John F. answered • 09/14/19
CPA tutoring univ. students, CPA candidates, business consultant
Nikkie, the stockholders’ equity is worth $607,500.
As with any mathematical or accounting problem involving numbers, it’s always beneficial to calculate the answer using two different methods. Often when I tutor, if a problem presents itself as being solvable using two approaches – I attempt to show the student both methods so they can be familiar with solving nearly any problem using more than one method. If you train yourself this way, then during multiple choice questions – if you mind goes ‘blank’, hopefully your adrenaline ‘kicks in’ and a second manner of problem resolution comes to mind to provide the correct answer.
Performing any problem using two different approaches is simply beneficial and provides a reliable, convenient way you can proof your own work.
Total Assets $810,000 less 25% for liabilities is equal to 810,000 x .25 = 202500. Squeeze or find the difference between 810,000 – 202,500 and your equity is worth 607,500.
Likewise, a second approach involves using algebraic approach – not too heavy, though!
Total Assets are $810,000 less 25% for liabilities. Okay, what is the remaining % value?
1.00 - .25 for liabilities provides the remaining value, .75, be representative for the equity value.
$810,000 x 75% = 607,500 for equity.
Granted these simple formulas or approaches are simply enough to do using a calculator or on a scratch piece of paper – but it is always beneficial to resolve any problem using two different approaches to broaden your skill set!
