Question

In: Finance

Assume the owners “take out” $1,780 rather than the entire profits. What is the Net Change...

Assume the owners “take out” $1,780 rather than the entire profits. What is the Net Change In Cash, and what does the new Balance Sheet look like?

Solutions

Expert Solution

Answer-

Taking out $ 1780 from entire profits decreases the Net cash by the same amount and this transaction affects both assets and owner's equity.

Balance sheet effect

Assets are reduced due to lowering of cash and owners equity also gets reduced due to to withdrawal as a result of the normal operations of a business. Both gets reduced by $ 1780


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