Question

Let’s put all the pieces together now. Suppose that you are analyzing Martin Company. You know that at the beginning of the year, the assets equaled $320,000 and the liabilities equaled $176,000. During the year, assets increased by $48,000 and owner's equity increased by $24,400. The change in owner's equity includes all increases and decreases. Further analysis reveals that the changes in owner's equity were caused by revenues of $223,200 and expenses totaling $112,320 during the year, and additional owner's investments of $50,000 in the first half of the year. Because of your understanding of the accounting equation, you realize that withdrawals by the owner must have also occurred during the year. However, you must  determine the amount for those withdrawals.

What is the amount of withdrawals made to the owner of Martin Company during the year?

Complete the equation below with amounts for the end of the year.

Assets

=

Liabilities

+

Owner's Equity

Answer 1

Beginning assets: $ 320,000
Beginning Liabilities: $ 176,000
Beginning Owners equity = $ 320,000 - $176,000 = $144,000
Now at the end of year,
Assets = $ 320,000 + $48,000 (increase) = $ 368,000
Owners equity = $ 144,000 + $24400 (increase) = $ 168,400
Liabilities will be = $368,000 - $168,400 = $199,600
Net Income during the year:
Revenue during the year			223200
Less: expense during the year			112320
Net Income during the year:			110880
Additional investment: $ 50,000
Now, Withdrawals shall be computed as under:
Beginning owners equity				144000
Add: Additional investment made				50000
Add: Net Income earned				110880
Less: ending owner equity				168400
Withdrawals				136480
Equation: Assets = Liabilities + Owners equity
	$ 368,000 = $ 199,600 + $168400