Question

In: Accounting

On January 1, Orange Crates had assets of P30,000 and owner’s equity of P20,000. During the...

On January 1, Orange Crates had assets of P30,000 and owner’s equity of P20,000.
During the year, the company had cash revenue or income of P10,000, cash expenses of
P8,000, paid 3,000 to its creditors, and its owner withdrew P1,000. What are the assets,
liabilities, and owner’s equity at the end of the year?

Solutions

Expert Solution

Assets as on January 1 = P 30,000

Owner's Equity as on January 1 = P 20,000

Liabilities as on January 1

= Assets - Owner's Equity

= P 30,000 - P 20,000

= P 10,000

Statement showing the effect of activities during the year:

Effect of Transaction
Transaction Assets = Liabilities + Owner's Equity Debit Credit
January 1 Balance 30,000 = 10,000 + 20,000
Cash Revenue 10,000 = + 10,000 Cash (Asset) Revenue (Retained Earnings)
Cash Expenses -8,000 = + -8,000 Expense (Retained Earnings) Cash (Asset)
Paid to Creditors -3,000 = -3,000 + Creditors (Liability) Cash (Asset)
Owner Withdrawal -1,000 = + -1,000 Drawings (Owner's Equity) Cash (Asset)
Ending Balance 28,000 = 7,000 + 21,000

Assets at the end of the year = P  28,000

Liabilities at the end of the year = P 7,000

Owner's Equity at the end of the year = P 21,000

ekkarill92 answered 10 months ago
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