Question

Section B: Short Questions [KN1, KN2: 5 B1: At the beginning of the year, Sky Company had total assets of $7,800,000 and total liabilities of $3,150,000. (KN1:2 marks) Required: Answer the following questions viewing each situation as being independent of the others. 1. If total assets increased $3,000,000 during the year, and total liabilities decreased $1,125,000, what is the amount of owner's equity at the end of the year?

Answer 1

Calculation of Owner's Equity Total Assets Shareholder's Equity + Liabilities Given, Beginining balance of Total Assets= $7,800,000 Increase in assets $3,000,000 Therefore, Closing Balance of Assets= $7,800,000+3,000,000 $10,800,000 Beginining balance of Total Liabilities $3,150,000 Decrease in Liabilities: $1,125,000 Therefore, Closing Balance of Liabilities= $3,150,000-1,125,000 $2,025,000 Shareholder's equity=Total Assets-Total Liabilities $10,800,000 - $2,025,000 $8,775,000