Freeman heyward Jones Ramirez
Beginning of the year: Assets $ 900,000 $490,000 $115,000 (d) Liabilities 360,000 260,000 81,000 $120,000 End of the year: Assets 1,260,000 675,000 100,000 270,000 Liabilities 330,000 220,000 80,000 136,000 During the year: Additional investment in the business (a) 150,000 10,000 55,000 Withdrawals from the business 75,000 32,000 (c) 39,000 Revenue 570,000 (b) 115,000 115,000 Expenses 240,000 128,000 122,500 128,000
Determine the missing amounts, identifying them by letter. (Hint: First determine the amount of increase or decrease in owner’s equity during the year.)
Answer:
In each case, solve for a single unknown, using the following equation:
Owner’s Equity (beginning) + Investments – Withdrawals + Revenues – Expenses = Owner’s Equity (ending)
Freeman Owner’s equity at end of year ($1,260,000 – $330,000)……………………… $930,000 Owner’s equity at beginning of year ($900,000 – $360,000)……………… 540,000 Increase in owner’s equity……………………………………………………… $390,000 Deduct increase due to net income ($570,000 – $240,000)………………… 330,000 $ 60,000 Add withdrawals………………………………………………….……………… 75,000 Additional investment in the business…………………………………… (a) $135,000 Heyward Owner’s equity at end of year ($675,000 – $220,000)……………………… $455,000 Owner’s equity at beginning of year ($490,000 – $260,000)………………… 230,000 Increase in owner’s equity………………………………………………….…… $225,000 Add withdrawals………………………………………………….……………… 32,000 $257,000 Deduct additional investment…………………………………………………. 150,000 Increase due to net income………………………………………………….… $107,000 Add expenses………………………………………………….…………………… 128,000 Revenue………………………………………………….……………………… (b) $235,000 Jones Owner’s equity at end of year ($100,000 – $80,000)………………………… $ 20,000 Owner’s equity at beginning of year ($115,000 – $81,000)………………… 34,000 Decrease in owner’s equity………………………………………………….…… $ (14,000) Deduct decrease due to net loss ($115,000 – $122,500)…………………… 7,500 $ (6,500) Deduct additional investment…………………………………………….…… 10,000 Withdrawals from the business…………………………………………… (c) $ (16,500) Ramirez Owner’s equity at end of year ($270,000 – $136,000)……………………… $134,000 Add decrease due to net loss ($115,000 – $128,000)………………………… 13,000 $147,000 Add withdrawals………………………………………………….………………… 39,000 Owner’s equity at beginning of year…………………………………………… $186,000 Deduct additional investment…………………………………………………… 55,000 $131,000 Add liabilities at beginning of year…………………………………………… 120,000 Assets at beginning of year………………………………………………… (d) $251,000