Kendra Gorman is the owner and operator of Mega Concepts, a motivational consulting business. At the end of its accounting period, December 31, 2013, Mega Concepts has assets of $1,250,000 and liabilities of $475,000. Using the accounting equation and considering each case independently, determine the following amounts:
a. Kendra Gorman, capital, as of December 31, 2013.
b. Kendra Gorman, capital, as of December 31, 2014, assuming that assets increased by $225,000 and liabilities increased by $110,000 during 2014.
c. Kendra Gorman, capital, as of December 31, 2014, assuming that assets decreased by $300,000 and liabilities increased by $90,000 during 2014.
d. Kendra Gorman, capital, as of December 31, 2014, assuming that assets increased by $550,000 and liabilities decreased by $135,000 during 2014.
e. Net income (or net loss) during 2014, assuming that as of December 31, 2014, assets were $1,500,000, liabilities were $375,000, and there were no additional investments or withdrawals.
Answer:
a. $775,000 ($1,250,000 – $475,000)
b. $890,000 ($775,000 + $225,000 – $110,000)
c. $385,000 ($775,000 – $300,000 – $90,000)
d. $1,460,000 ($775,000 + $550,000 + $135,000)
e. Net income: $350,000 ($1,500,000 – $375,000 – $775,000)