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    dkjravn's Avatar
    dkjravn Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Sep 22, 2012, 11:57 AM
    How to find the previous year's Liability using the Accounting Equation
    The question is as follows.

    Dec 31 2010
    Assets = given
    Liabilities = x

    Dec 31 2011
    Assets = Given
    Liabilities = Given

    During year 2011
    Stock Issuance = Given
    Net Income/Loss = Given
    Dividends = Given.

    I am having a hard time adapting the Equation to this situation. I know how to solve for almost all other situations here but I am having a really hard time balancing everything for the previous year's Liabilities. Any help would be great.
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
    Ultra Member
    		  
    #2

    Sep 22, 2012, 01:19 PM
    First you need to find equity at 31 Dec 2011. Assets - Liabilities = equity

    Next take your equity at 31 Dec 2011 and subtract out your stock issuances and subtract out your net income and add your dividends to get equity at 31 Dec 2010.

    Finally take your assets at 31 Dec 2010 and subtract out your equity at 31 Dec 2010 to get your liabilities at 31 Dec 2010.
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