Question

As of January 1, Terrace Waters, Capital had a credit balance of $64,500. During the year, withdrawals totaled $1,300, and the business incurred a net loss of $46,100.

a. Compute the balance of Terrace Waters, Capital as of the end of the year. Credit balance $

b. Assuming that there have been no recording errors, will the balance sheet prepared at December 31 balance? Yes

Answer 1

Answer:

A) The following are the details given.

i) As of January 1, Terrace Waters, Capital had a credit balance of $64,500.

ii) During the year, withdrawals totaled $1,300 and the business incurred a net loss of $46,100.

Therefore the balance of Terrace Waters, Capital as of the end of the year will be as follows:

a) Capital balance as of January 1 (-) Withdrawal (+) Net Income (loss)

b) $64,500 (-) $1,300 (+) ($46,100) = ($17,100)

Hence, the balance of Terrace Waters, Capital as of the end of the year is ($17,100) i.e. Credit balance $17,100

B) In this case please note the following:

i) There is no recording errors as mentioned

ii) The balance of Terrace Waters, Capital as of the end of the year is ($17,100) i.e. Credit balance $17,100 (Refer above at A)

iii) The Capital as at B)ii) above will be shown in the Owner's Equity.

In view of the above the balance sheet prepared at December 31 will balance.