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TKColli · Feb 10, 2007, 05:42 PM

One item is omitted in the following summaries of balance sheet and income statement data:

Beginning of the year:
Assets $540,000
Liabilities $324,000

End of Year:
Assets: 670,500
Liabilities: $292,500

During the Year:
Additional Investment in the business: ?
Withdrawals from the business: 36,000
Revenue: $177,975
Expenses: $97,200

I am having some real problems with this- I had thought that if I found out how much the owner's equity changed during the year, and actually created an income statement and a balance sheet using this info, then the rest would be simple math- but I am not coming up with the correct numbers. Could someone explain the steps I need to take to determine the missing number (in this case, the additional investments in the business for the year?)

Any tips or pointers that would set me on the right track would be greatly appreciated!

Thanks,

CaptainForest · Feb 10, 2007, 07:49 PM

Beginning of the year:
Assets $540,000
Liabilities $324,000
Therefore, we know that Owner's Equity must be 540,000 – 324,000 = 216,000

End of Year:
Assets: 670,500
Liabilities: $292,500
Owners Equity: 378,000

During the Year:
Additional Investment in the business: ?
Withdrawals from the business: 36,000
Revenue: $177,975
Expenses: $97,200

How does one calculate Owner's Equity?
Beginning Balance + Net Income – Dividends (or Drawings) + Investments:
216,000
+ 177,975 – 97, 200 (net income)
– 36,000 (withdrawals)
+ investments ?
= ending balance 378,000

260,775 + investments = 378,000

Investments = 117,225

TKColli · Feb 10, 2007, 09:32 PM

I got it! I was trying to use information that I had no need for, which was throwing off the balances! Yea!:)