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 liabilities 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 increased 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.
Net income    $

Answer 1

So your Accounting Equation is

Assets = Liabilities+stockholder's equity

a)So given the equation

Assets=$5,250,000 Liabilities=$1,600,000

Stockholder's equity=Assets-liabilities

Stockholder's Equity=$5,250,000-$1,600,000=$3,650,000

b)Assets Increased By $800,000

So the assets revised Figure=$5,250,000+$800,000=$6,050,000

Liabilities Is Increased By $330,000

So the Liabilities revised Figure=$1,600,000+$330,000=$1,930,000

Stockholders Equity=$6,050,000-$1,930,000=$4,120,000

c)Assets Decreased By $600,000

So the assets revised Figure=$5,250,000-$600,000=$4,650,000

Liabilities Is Increased By $140,000

So the Liabilities revised Figure=$1,600,000+$140,000=$1,740,000

Stockholders Equity=$4,650,000-$1,740,000=$2,910,000

d)Assets Increased By $440,000

So the assets revised Figure=$5,250,000+$440,000=$5,690,000

Liabilities Is Decreased By $90,000

So the Liabilities revised Figure=$1,600,000-$90,000=$1,510,000

Stockholders Equity=$5,690,000-$1,510,000=$4,180,000

e)Firstly Lets compute the stock holder;s equity:

	October 31,2017	October 31,2018
Assets	$5,250,000	$6,140,000
Less:liabiltities	($1,600,000)	($1,950,000)
Stockholder's Equity	$3,650,000	$4,190,000

So given is that no equity was issued neither dividend was paid

So the difference between the two dates of stockholdr;s equity represents Net Income

So Net income =$4,190,000-$3,650,000=$540,000