Question

X Company was formed on July 1, 2017, and had the following transactions during the rest of 2017: received $8,444 in cash contributions from the owners purchased $8,760 worth of merchandise, all on account sold merchandise that cost $6,377 for $10,629, all on account paid $3,943 to suppliers for merchandise purchased on account received $3,297 from customers for merchandise sold on account paid $5,105 for land and equipment borrowed cash from the bank in the amount of $4,236 What were total equities on December 31, 2017 (ignore depreciation on the equipment and interest on the loan)?

Answer 1

Accounting equation should be done here for each transaction.

Assets = Liabilities + Equity

Particulars	Assets	=	Liabilities	+	Equity
Contribution from owner of $8,444	+8,444 cash	=	0	+	+8,444
On account purchase of $8,760	+8,760 supplies	=	+8,760 payable	+	0
On account sale of $10,629 having cost price of $6,377	+10,629 Receivable -6,377 inventory	=	0		+4,252 profit
Paid supplier by $3,943	-3,943 cash	=	-3,943 payable	+	0
Received from customer $3,297	+3,297 cash -3,297 receivable	=	0	+	0
Paid for land $5,105	-5,105 cash +5,105 land	=	0	+	0
Borrowing cash of $4,236	+4,236 cash	=	+4,236 loan
Total	21,749	=	9,053	+	12,696

Answer: total equity is $12,696.