During 2024, whispering creek spa reported revenue of $55,000. Total expenses for the year were $50,000....

During 2024, whispering creek spa reported revenue of $55,000. Total expenses for the year were $50,000. Whispering creek spa ended the year with total assets of 28,000, and it owed debts totaling $11500. At year end 2023 tge busness reported total assets of $23000 and total liabilities of $11500. compute whispering creeks spas net income for 2024 and did the Spas owners equity increase or deceease during 2024 ans by how much

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Expert Solution

For the year 2024,

Net income = Revenue - Expense

= $55,000 - $50,000

= $5,000

Asset = Liablity + Equity

28,000 = 11,500 + Equity

Equity = $16,500 (It include $5,000 net income which comes under retained earnings, therefore capital contribution is $11,500 )

For the year 2023

Asset = Liablity + Equity

23,000 = 11,500 + Equity

Equity = $11,500 (assuming there is no closing retained earnings)

To conclude, we can say that there is an increase in Equity by $5,000 due to net income, there is no change in capital contribution, which means there is not additional capital.

ekkarill92 answered 2 years ago

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