Answer to Question #254551 in Accounting for Thanu

Question

1.   Annie Rasmussen is the owner and operator of Go44, a motivational consulting business. At the end of its accounting period, December 31, 2018, Go44 has assets of $720,000 and liabilities of $180,000. Using the accounting equation and considering each case independently, determine the following amounts:

(c) Annie Rasmussen, capital, as of December 31, 2019, assuming that assets decreased by $168,000 and liabilities increased by $15,000 during 2019.

(d) Annie Rasmussen, capital, as of December 31, 2019, assuming that assets increased by $175,000 and liabilities decreased by $18,000 during 2019.

(e) Net income (or net loss) during 2019, assuming that as of December 31, 2019, assets were $880,000, liabilities were $220,000, and there were no additional investments or withdrawals.

Answer 1

c) Assets decreased by $168,000 so total assets = $720,000 - $168,000 = $552,000

Liabilities increased by $15,000 so total liabilities = $180,000 + $15,000 = $195,000

Capital as at 31st Dec 2018 = $552,000 - $195,000 = $357,000

d) Assets increased by $175,000 so total assets = $720,000 + $ $175,000 = $895,000

Liabilities decreased by $18,000 so total liabilities = $180,000 - $ 18000 =$162,000

Capital as at 31st Dec 2018 = $895,000 - $162,000 = $733,000

e) Assets = $880,000

Liabilities = $220,000

Capital as at 31st Dec 2018 = $720,000 - $180,000 = $540,000

Capital as at 31st Dec 2019 = $880,000 - $220,000 = $660,000

Gain during the year 2019 = Closing capital - Opening capital

= $660,000 - $540,000 = $120,000

Gain during year 2019 = $120,000