EX 1-7 Accounting equation

Annie Rasmussen is the owner and operator of Go44, a motivational consulting business. At the end of its accounting period, December 31, 2018, Go44 has assets of $720,000 and liabilities of $180,000. Using the accounting equation and considering each case independently, determine the following amounts:

a. Annie Rasmussen, capital, as of December 31, 2018.

b. Annie Rasmussen, capital, as of December 31, 2019, assuming that assets increased by $96,500 and liabilities increased by $30,000 during 2019.

c. Annie Rasmussen, capital, as of December 31, 2019, assuming that assets decreased by $168,000 and liabilities increased by $15,000 during 2019.

d. Annie Rasmussen, capital, as of December 31, 2019, assuming that assets increased by $175,000 and liabilities decreased by $18,000 during 2019.

e. Net income (or net loss) during 2019, assuming that as of December 31, 2019, assets were $880,000, liabilities were $220,000, and there were no additional investments or withdrawals.

Answers:
a. $540,000  ($720,000 – $180,000)
b. $606,500  ($540,000 + $96,500 – $30,000)
c. $357,000  ($540,000 – $168,000 – $15,000)
d. $733,000  ($540,000 + $175,000 + $18,000)
e. Net income:  $120,000  ($880,000 – $220,000 – $540,000)