Selby Hinkle is the sole stockholder and operator of Osaka, amotivational consul
ID: 2457581 • Letter: S
Question
Selby Hinkle is the sole stockholder and operator of Osaka, amotivational consulting business. At the end of its accountingperiod, December 31, 2007, Osaka has assets of $800,000 andliabilities of $375,000. Using the accounting equation andconsidering each case independently, determine the followingamounts:
a. Stockholders’equity, as of December 31, 2007.
b. Stockholders’ equity, asof December 31, 2008, assuming that assets increased by $125,000and liabilities increased by $60,000 during 2008.
c. Stockholders’equity, as of December 31, 2008, assuming that assets decreased by$100,000 and liabilities increased by $40,000 during 2008.
d. Stockholders’ equity, asof December 31, 2008, assuming that assets increased by $80,000 andliabilities decreased by $200,000 during 2008.
e. Net income (or net loss)during 2008, assuming that as of December 31, 2008, assets were$910,000, liabilities were $400,000, and there were no dividendsand no additional capital stock was issued.
Explanation / Answer
A. Assets =Liabilities + stockholders equity 800,000 =375,000 + stockholders equity stockholders equity = 800,000 - 375,000 = $ 425,000 B. Assets = Liabilities +stockholders equity 800,000 = 375,000 +425,000 + 125,000 60,000 925,000 = 435,000 +stockholders equity stockholders equity = 925,000 - 435,000 = 490,000 C.Assets = Liabilities + stockholders equity 800,000 = 375,000 + 425,000 (100,000) 40,000 700,000 = 415,000 + stockholders equity stockholders equity = 700,000 - 415,000 = 285,000 D.Assets = Liabilities + stockholders equity 800,000 = 375,000 + stockholders equity + 80,000 (200,000) 880,000 = 175,000 + stockholders equity stockholders equity = 880,000 - 175,000 = 705,000 E.Assets = Liabilites + owners equity 910,000 = 400,000 + 425,000 + net income or loss net income = 910,000-400,000-425,000 =85,000