Question

Problems 1 to 7 – (worth 40 Points in Total) Problem 1 (worth 5 Points) 1. 1(a) - Scott Camera Shop, a proprietorship, started the year with total assets of $80,000 and total liabilities of $40,000. During the year, the business earned revenues of $120,000 and incurred expenses of $70,000. Scott made withdrawals of $60,000. What is the amount of Scott's owner's equity at the end of the year? 1(b) - Sharon Samson starts a plumbing service, Reliable Waterworks, a proprietorship. Selected transactions are described as follows: A) Sharon deposits $7,000 into a new checking account for the company. B) Reliable pays $4,000 cash for equipment to be used for plumbing repairs. C) Reliable borrows $15,000 from a local bank and deposits the money in the checking account D) Reliable pays $600 rent for the first month. E) Reliable pays $400 cash for plumbing supplies to be used on various jobs in the future. F) Reliable completes a plumbing repair project for a local lawyer and receives $1,300 cash. G) Sharon makes the withdrawals of $2,500. After all the transactions, what is the amount of total assets?

Answer 1

1(a)

Capital at the end = capital at the beginning +additions to capital(eg, profit) - deletions from capital (withdrawal)

Capital at the beginning = Assets - liabilities

=80000-40000=40000

Profit= revenue - expenses

=120000-70000=50000

Withdrawal = 60000

Capital at the end =40000+50000-60000

=30000

1(b)Calculation of amount of total asset after all transactions :
A) Cash +7,000
B) – 4,000 cash + 4,000 equip.
C) +15,000 cash
D) – 600 cash (rent)
E) – 400 cash+ 400 supplies
F) +1,300 cash
G) – 2,500 cash(dividends)
= 20,200