PE 1-2B Accounting equation

Fritz Evans is the owner and operator of Be-The-One, a motivational consulting business. At the end of its accounting period, December 31, 2013, Be-The-One has assets of $395,000 and liabilities of $97,000. Using the accounting equation, determine the following amounts:

a. Owner’s equity as of December 31, 2013.
b. Owner’s equity as of December 31, 2014, assuming that assets decreased by $65,000 and liabilities increased by $36,000 during 2014.


Answer:

a. A = L + OE
$395,000 = $97,000 + OE
OE = $298,000
b. A = L + OE
–$65,000 = +$36,000 + OE
OE = –$101,000
OE on December 31, 2014 =
$197,000 = $298,000 – $101,000