Crazy Quilting, LLC has current assets of $100,000, fixed assets of $400,000, current liabilities of $50,000,...

Crazy Quilting, LLC has current assets of $100,000, fixed assets of $400,000, current liabilities of $50,000, and long-term liabilities of $250,000.
1. What is their shareholder’s equity?

If they sell 1,000 shares of stock for $100 each, what will change on their balance sheet? What changes on their income statement?

If they sell some of their old equipment for $75,000, that has a depreciated value of $50,000, what will change on their balance sheet? What will their income statement show?

Solutions

Expert Solution

A)total asset = capital + liblity

CA +FA = CL+ DEBT + SHAREHOLDERS EQUITY

100000+400000= 50000+ 250000+ SE

Shareholders equity = $200000

B) effect on balance sheet

Shareholders equity will increase by 100@1000

100000 and on the asset side cash i.e current asset will increase by same amount

Effect on income statement

There is no change will accur in income statement except in future when company starts using the additional capital to increase revenue

C) fixed asset will decrease by 50000

Current asset will increase by 75000

Shareholders equity will increase by 25000 i.e profit on sale of asset 75000- 50000

Effect on income statement

Net income before tax will increase by 25000

i.e profit on sale of asset

jeff jeffy answered 2 years ago

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