Accounting Equation

Question

Accounting Equation Shannon Cook is the stockholder and operator of You're A Star LLC , a motivational consulting business. At the end of its accounting period, December 31, 20Y2, You're A Star has assets of $777,000 and liabilities of $186,000. Using the accounting equation determine the following amounts:

A. Stockholders equity as of December 31, 20Y2 .

B. Stockholders equity as of December 31, 20Y3 , assuming that assets decreased by $148,000 and Tables decreased by $45,000 during 20Y3

Answer 1

The accounting equation is Assets= Liabilities + Stockholders' Equity (A= L+ E)

A). December 31, 20Y2 :By substituting the values provided in the problem you get

777,000= 186,000 + E. Solve for E by subtracting 186,000 from both sides.

The accounting equation gives the financial position of an entity as of a specific date. These accounts can be found on the Balance Sheet which is part of a company's financial statements.

B). December 31, 20Y3: Given the facts from part A and that our balance as of December 31, 20Y2 is now our beginning balance for Year 3, we can calculate the new balances.

A: If Assets decreased by 148,000, then we need to subtract (777,0000- 148,000)

L: I'm assuming you meant to put "Liabilities" decreased by 45,000, then we need to subtract (186,000- 45,000)

Our new equation should be:

629,000 = 141,000 + E. Solve for E by subtracting 141,000 from both sides.

A)591,000

B)488,000