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ihaveapulse23
Aug 28, 2012, 10:34 AM
How can I solve the liabilities and equity of the previous year (2010) when I'm only given the assets of 2010 and the information from the following year (2011)

The Question looks like this. PLEASE DO NOT SOLVE IT FOR ME- I just would like an explanation

Dec. 31, 2010
Assets = $106,470
Liabilities = ?
Equity = ?

Dec. 31, 2011
Assets = $115,920
Liabilities = $91,576

During 2011
Stock issuance = $6,500
Net Income (loss) = $7,550
Cash dividends = $11,000

I already solved the Equity for 2011, it's $27,394

Thank you guys!

ihaveapulse23
Aug 28, 2012, 10:52 AM
I figured it out. In case anyone else has the same question, here's how I did it:

Using the same configuration as if you were to solve for Net Income (using 2011's given data)

? = equity from 2010
+6,500 (Stock issuance)
+7,550 (Net income)
-11,000 (Cash dividends)
= 3,050

Now, take this number and subtract it from the solved equity from 2011 (excluding these benefits, so instead of 27, 394- you have $24,344 as the equity [Assets - Liabilities]). So you end up with this: 24,344 - 3,050 and you get 21,294. The Equity for 2010.
Now, Asset - Equity = Liabilities and you get $85,176.

Answers for 2010:
Equity = $21,294
Liabilities = $85,176

ArcSine
Aug 29, 2012, 04:58 AM
You got it, nice job. And thanks for showing your approach; that'll help someone down the line, I'm sure.

ihaveapulse23
Aug 29, 2012, 07:27 AM
You got it, nice job. And thanks for showing your approach; that'll help someone down the line, I'm sure.

Thank you!