[pearlfect]

Presented below is selected information related to Flanagan Company at December 31, 2014. Flangan reports financial information monthly.

Equipment $10,000
Cash 8,000
Service Revenue 36,000
Rent Expense 11,000
Accounts Payable 2,000
Utilities Expense 4,000
Accounts Receivable 9,000
Salaries and Wages Expense 7,000
Notes Payable 16,500
Dividends 5,000

(c) Determine the equity of Flanagan at December 31, 2014.

According to solution
"By rewriting the accounting equation, we can compute equity as assets minus liabilities."
"Note that it is not possible to determine the company's equity in any other way,
because the beginning total for equity is not provided."

What does bold sentence mean?

[Fr_Chuck]

Thank you for cutting and pasting your home work on our web site. We do not do home work for you, which is against site rules. But if you tell us what you think the answer is, then we can discuss it.

Chuck, moderator

[pearlfect]

Thank you for reply. The question is not my homework. In self-study, I didn't understand solution. I tried to understand but failed. So, I ask a question in this web site. And I don't want answer. I already know answer. Just I want to know "the beginning total for equity" means. I tried to understand but I don't know. I think that means equity before December. But I'm not sure about that.

[pready]

First you need to know what your accounts are i.e. asset, liability, equity.

Your Assets are Cash, Equipment, and Accounts Receivable

Your Liabilities are Accounts Payable and Notes Payable.

So total your assets and total your liabilities, then subtract your liabilities from your assets to get owners equity.

Based on the information provided you have to find ending equity first because you do not have the beginning equity amount.

Once you know the ending equity amount you can find the beginning equity amount. There is another formula that can be used for calculating equity. It is:

2. Ending Equity = Beginning Equity + Net Income - Dividends

First you have to find net income, which is Revenues - Expenses.

Now you have all the information needed to calculate beginning equity.