Question

George Carpenter is the sole stockholder and operator of XYZ, Inc. a consulting firm. At the end of its accounting period, December 31, 2015, XYZ, Inc. has assets of $400,000 and liabilities of $145,000. Using the accounting equation and considering each case independently, determine the following amounts:

a) Stockholder’s equity on 12/31/2015.

b) The amount and direction (increase or decrease) change in stockholder’s equity if, during 2016, assets increased by $45,000 and liabilities decreased by $10,000.

c) Net income (or net loss) during 2016, assuming that as of December 31, 2016, assets were $410,000, liabilities were $147,000, capital stock of $3,000 was issued, and dividends of $8,000 were paid.

Answer 1

	Given that-		as on Dec -15
	Assets		$400,000
	liabilities		$145,000
	Answer a)
	Stockholder’s equity
	we know that -   Asset = Liabilities + Equity
	therefor share holder's equity = 400000-145000					$255,000
	Answer b)
			i		ii	iii=i+ii
	Given that-		as on Dec -15		Increase	as on Dec -2016
a	Assets		$400,000		45000	$445,000
b	liabilities		$145,000		10000	$155,000
c=a-b	Share holder equity		$255,000		$35,000	$290,000
	Hence, shareholder's equity increased by $35000
	Answer c)
			i			ii
	Given that-		as on Dec -15			as on Dec -2016
a	Assets		$400,000			$410,000
b	liabilities		$145,000			$147,000
c	Share holder equity		$255,000			$263,000
d	Change in equity = 263000-255000					$8,000
e	Add: Dividend paid					8000
f	Less : issue of equity					$3,000
g=d+e-f	Net income					$13,000