At the beginning of the year, Hernandez Company had total assets of $800,000 and

Question

At the beginning of the year, Hernandez Company had total assets of $800,000 and total liabilities of $500,000. Answer the following questions.

(a) If total assets increased $150,000 during the year and total liabilities decreased $80,000, what is the amount of owner's equity at the end of the year?

$

(b) During the year, total liabilities increased $100,000 and owner's equity decreased $70,000 What is the amount of total assets at the end of the year?

$

(c) If total assets decreased $80,000 and owner's equity increased $120,000 during the year, what is the amount of total liabilities at the end of the year?

Explanation / Answer

Assets = Liabilities + Owners Equity Assets - Liabilities = Owners Equity 1. (800,000 + 150,000) -( 500,000-80,000) = 530,000 Owners equity at the end of the year = $ 530,000 2. Let x be the increase in assets ( 800,000 + x) - ( 500,000 + 100,000) = ( 800,000 - 500,000-70,000) (800,000 + x) -600,000 = 230,000 x + 200,000 = 230,000 x = 30,000 Hence the total amount of assets = $ 830,000 3.( 800,000-80,000) - (500,000+x) = 300,000 + 120,000 720,000 -500,000 +x = 420,000 x = 200,000 Amount of total liabilities = 500,000 + 200,000 = 700,000

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