Question

Todd Olson is the owner and operator of Alpha, a motivational consulting business. At the end of its accounting period, December 31, 2013, Alpha has assets of $777,270 and liabilities of $245,620. Using the accounting equation and considering each case independently, determine the following amounts. a. Todd Olson, capital, as of December 31, 2013. $ b. Todd Olson, capital, as of December 31, 2014, assuming that assets increased by $122,810 and liabilities increased by $73,840 during 2014. $ c. Todd Olson, capital, as of December 31, 2014, assuming that assets decreased by $61,400 and liabilities increased by $21,760 during 2014. $ d. Todd Olson, capital, as of December 31, 2014, assuming that assets increased by $102,600 and liabilities decreased by $38,860 during 2014. $ e. Net income (or net loss) during 2014, assuming that as of December 31, 2014, assets were $979,360, liabilities were $159,340, and there were no additional investments or withdrawals.

Answer 1

Assets as at December 31, 2013 = $777,270

Liabilities as at December 31, 2013 = $245,620

(a) Capital as at December 31, 2013 = Assets - Liabilities

= 777,270 - 245,620

= $531,650

(b) During 2014, assets increased by $122,810 and liabilities increased by $73,840

Hence, assets as at December 31, 2014 = 777,270 + 122,810

= $900,080

Hence, liabilities as at December 31, 2014 = 245,620 + 73,840

= $319,460

Capital as at December 31, 2014 = Assets - Liabilities

= 900,080 - 319,460

= $580,620

(c) During 2014, assets decreased by $61,400 and liabilities increased by $21,760

Hence, assets as at December 31, 2014 = 777,270 - 61,400

= $715,870

Hence, liabilities as at December 31, 2014 = 245,620 + 21,760

= $267,380

Capital as at December 31, 2014 = Assets - Liabilities

= 715,870 - 267,380

= $448,490

(d) During 2014, assets increased by $102,600 and liabilities decreased by $38,860

Hence, assets as at December 31, 2014 = 777,270 + 102,600

= $879,870

Hence, liabilities as at December 31, 2014 = 245,620 - 38,860

= $206,760

Capital as at December 31, 2014 = Assets - Liabilities

= 879,870 - 206,760

= $673,110

(e) Assets as at December 31, 2013 = $777,270

Liabilities as at December 31, 2013 = $245,620 Capital as at December 31, 2013 = Assets - Liabilities

= 777,270 - 245,620

= $531,650

Assets as at December 31, 2014 = $979,360

Liabilities as at December 31, 2014 = $159,340 Capital as at December 31, 2014 = Assets - Liabilities

= 979,360 - 159,340

= $820,020

Net income = Capital as at December 31, 2014 - Capital as at December 31, 2013

= 820,020 - 531,650

= $288,370

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