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View Full Version : How do I figure out equity without liability? Only stocks, net income, and dividends?


misro2003
Jan 13, 2011, 09:34 AM
I am so confused with this accounting question, I understand that Assets = Liabilities + Equity, but how do you figure out Equity without the liability, only stocks, net income, and dividends? Here is the question...

What is the amount of equity on December 31, 2009?

FINANCIAL STATEMENT FOR COMPANY A
December 31, 2009:
Assets - 36,000
Liabilities - ?
During the year 2009:
Stock Issuances - 6,000
Net Income - 7.760
Cash Dividends - 3,500

solutionhelp
Oct 23, 2011, 12:00 PM
assets
36,000$

Liabilities + owners equity
current liability
25740$


owner's equity
capital stock 6000$
retained earning 4260$
10260$

total 36000$


as you know that the L.H.S must be equal to right hand side in an accounting equation.
and that the net income is always reported in the retained earning account in balance sheet under owner's equity. So you less the net income by dividends i.e ( 7760-3500=4260) add that to the capital stock i.e( 6000 +4260=10260) now you have got assets you have got owners equity total and you subtract them both to get liability which is (25740)