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Question

Question, at the beginning of the year Jones Company's assets are $123,000 and its equity is $159,250. During the year assets increase $90,000 and liabilities increase $13,000. What is the equity at the end of the year? Ok this is not the actual question for my homework just an example. Please help and show me how to get the equity. Thanks!

Answer 1

At any time of the year,

Assets = Liability + Equity

At the start of the year,

Assets = 123,000 and Equity = 159,250 and this is not a good example because the liabilities will be a negative number. Anyway, for purposes of analyzing this problem, let us assume that the equity is 59, 250 (instead of 159,250).

Thus being said, the liability then is 123,000 - 59,250 = 63,750.

At the end of the year, since assets increased by 90,000, then the year end assets = 123,000 + 90,000 = 213,000

Also, since the liabilities increased by 13,000, then the year end liabilities will be 63,750 + 13,000 = 76,750.

Going back to the basic accounting equation,

213,000 = 76,750 + Equity

Equity = 213,000 - 76.750

Equity = 136,250

Hope this analysis helps.