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

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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