Question

Accounting Equation Inspirational Inc. is a motivational consulting business. At the end of its accounting period, October 31, 2017, Inspirational has assets of $5,250,000 and habilities of $1,600,000. Using the accounting equation and considering each case independently, determine the following amounts: 

a. Stockholders' equity as of October 31, 2017. 

b. Stockholders' equity as of October 31, 2018, assuming that assets creased by $800,000 and liabilities increased by $330,000 during 2018. 

c. Stockholders equity as of October 31, 2018, assuming that assets decreased by $600,000 and liabilities increased by $140,000 during 2018. 

d. Stockholders' equity as of October 31, 2018, assuming that assets increased by $440,000 and liabilities decreased by $90,000 during 2018 

e. Net income (or net loss) during 2018, assuming that as of October 31, 2018, assets were $6,140,000, liabilities were $1,950,000, and no additional common stock was issued or dividends paid. 

Answer 1

Solution 1-a:

Stockholders' Equity as of October 31, 2017 = Assets as of October 31, 2017 - Liabilities as of October 31, 2017

= $5,250,000 - $1,600,000

= $3,650,000

Solution 1-b:

Assets as of October 31, 2018 = $5,250,000 + $800,000 = $6,050,000

Liabilities as of October 31, 2018 = $1,600,000 + $330,000 = $1,930,000

Stockholders' Equity as of October 31, 2018 = Assets as of October 31, 2018 - Liabilities as of October 31, 2018

= $6,050,000 - $1,930,000

= $4,120,000

Solution 1-c:

Assets as of October 31, 2018 = $5,250,000 - $600,000 = $4,650,000

Liabilities as of October 31, 2018 = $1,600,000 + $140,000 = $1,740,000

Stockholders' Equity as of October 31, 2018 = Assets as of October 31, 2018 - Liabilities as of October 31, 2018

= $4,650,000 - $1,740,000

= $2,910,000

Solution 1-d:

Assets as of October 31, 2018 = $5,250,000 + $440,000 = $5,690,000

Liabilities as of October 31, 2018 = $1,600,000 - $90,000 = $1,510,000

Stockholders' Equity as of October 31, 2018 = Assets as of October 31, 2018 - Liabilities as of October 31, 2018

= $5,690,000 - $1,510,000

= $4,180,000

Solution 1-e:

Stockholders' Equity as of October 31, 2017 = Assets as of October 31, 2017 - Liabilities as of October 31, 2017

= $5,250,000 - $1,600,000 = $3,650,000

Stockholders' Equity as of October 31, 2018 = Assets as of October 31, 2018 - Liabilities as of October 31, 2018

= $6,140,000 - $1,950,000 = $4,190,000

Net Income (or Net Loss) during 2018 as there is no additional common stock issued or no dividend paid

= Stockholders' Equity as of October 31, 2018 - Stockholders' Equity as of October 31, 2017

= $4,190,000 - $3,650,000

= $540,0000