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23 September, 08:13

The summaries of balance sheet and income statement data follow.

Beginning of year:

Total assets $ 85,000

Total liabilities 62,000

Total owner's equity?

End of year:

Total assets 110,000

Total liabilities?

Total owner's equity 60,000

Changes during year in owner's equity:

Investments by owner?

Drawings 18,000

Total revenues 175,000

Total expenses 140,000

Required: Calculate the missing items above.

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  1. 23 September, 08:31
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    Total owner's equity = $23,000

    Total liabilities = $50,000

    Investment by owner = $20,000

    Explanation:

    We use the accounting equation which is presented below:

    Total assets = Total liabilities + owners equity

    At the beginning of the year

    The owner equity would be

    = Total assets - total liabilities

    = $85,000 - $62,000

    = $23,000

    At the end of the year

    The total liabilities would be

    = Total assets - total owners equity

    = $110,000 - $60,000

    = $50,000

    The investment by owner would be

    = Ending balance of owners equity + drawing - opening balance of owners equity + total expenses - total revenues

    = $60,000 + $18,000 - $23,000 + $140,000 - $175,000

    = $20,000
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