Question

At the beginning of the year, Morales Company had total assets of $845,000 and total liabilities of $600,000. (Treat each
item independently.)
(a) If total assets increased $177,000 during the year and total liabilities decreased $71,000, what is the amount of
stockholders' equity at the end of the year?

Answer 1

Answer:

$ 493,000

Step-by-step explanation:

Assets at the beginning of the year = $ 845,000

Liabilities at the beginning of the year = $ 600,000

At the end of the year:

Assets increased by $ 177,000. This means total assets by the end of the year  would be = $ 845,000 +  $ 177,000 = $ 1,022,000

Liabilities decreased by $ 71,000. This means total liabilities by the end of the year would be = $ 600,000 - $ 71,000 = $ 529,000

We have to calculate the stockholders' equity at the end of the year. Stockholders' equity is defined as difference of Total assets and Total liabilities.

i.e.

Stockholders' equity = Total Assets  - Total Liabilities.

Using the values in above formula, we get:

Stockholders' equity = $ 1,022,000 - $ 529,000 = $ 493,000

Thus, the amount of  stockholders' equity at the end of the year is $ 493,000.