Question

The total increase or decrease for one component of the accounting equation is missing in each of the following situations:
i Assets decreased by $30 000; liabilities decreased by $19 500.
ii Owner’s equity decreased by $37 250; assets decreased by $22 500.
iii Liabilities increased by $3000; owner’s equity decreased by $15 000.
iv Owner’s equity increased by $54 000; assets increased by $28 950.

Required: Using Assets: $135 000 = Liabilities: $45 000 + Owner’s equity: $90 000 as the beginning accounting equation for each of the above situations, and treating each situation independently, determine:
a) the total increase or decrease for the missing component of the equation
b) the amount of each component in the ending accounting equation.

Answer 1

i.

a.increase or decrease for missing component (30,000-19,500)	$10,500 decrease in owners equity
b.amount of each component in ending equation (135000-30000)=(45000-19500) +(90,000-10500)	assets 105,000= liabilities 25,500 + owners equity 79,500

ii.

a. liabilities increase(37,250-22500)	14,750 increase
b.amount of each component in ending equation (135000-22500) = (45000+14750) + (90000-37250)	assets 112,500 =liabilities 59,750 + owners equity 52,750.

iii.

a assets decrease (15,000-3000)	12,000
b.amount of each component in ending equation (135000-12000)=(45000+3000) +(90,000-15000)	assets 123,000 = liabilties 48,000+ owners equity 75,000

iv.

liabilities decrease (54,000-28,950)	25,050 liabilities decrease
amount of each component in ending equation (135000+28950)= (45000-25050)+(90000+54000)	163,950 assets = 19,950 liabilities +144,000 owners equity