Q. 6SE
Question
Using the accounting equation Thompson Handyman Services has total assets for the year of \(18,400 and total liabilities of \)9,050. Requirements 1. Use the accounting equation to solve for equity. 2. If next year assets increased by \(4,300 and equity decreased by \)3,850, what would be the amount of total liabilities for Thompson Handyman Services?
Step-by-Step Solution
Verified Answer
(1) Equity equals $9,350.
(2) Total liabilities equals $17,200
1Step1: Calculation of equity
Equity is calculated as follows by the accounting equation.
| Assets | = | Liablities | + | Equity |
| $18,400 | = | $9,050 | + | ? |
| $18,400 | = | $9,050 | + | $9,350 |
Note: Equity is $9,350 ($18,400-$9,050).
2Step2: Calculation of total liabilities
Total liabilities is calculated as follows by the accounting equation.
| Assets | = | Liabilities | + | Equity |
| $18,400 | = | $9,050 | + | $9,350 |
| $22,700 | = | ? | + | $5,500 |
| $22,700 | = | $17,200 | + | $5,500 |
Note: Total liabilities is $17,200 ($22,700-$5500).
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