Question

A sole proprietorship had the following assets and liabilities at the beginning and end of this year.

	Assets					Liabilities
Beginning of the year		$	109,500				$	46,943
End of the year			163,500					66,218

1. Owner made no investments in the business, and no withdrawals were made during the year.
2. Owner made no investments in the business, but withdrew $1,100 cash per month for personal use.
3. Owner made no withdrawals during the year, but the owner did invest an additional $45,000 cash.
4. Owner withdrew $1,100 cash per month for personal use, and the owner invested an additional $35,000 cash.

Determine net income or net loss for the business during the year for each of the above separate cases: (Decreases in equity should be indicated with a minus sign.)

	a.	b.	c.	d.
Beginning of the year—Equity	$62,557	$62,557	$62,557	$62,557
Owner investments			45,000	45,000
Withdrawals by owner
Net income (loss)
End of the year—Equity		$0	$0	$0

Answer 1

• Requirement asked

	a.	b.	c.	d.
Beginning of the year—Equity	$62,557	$62,557	$62,557	$62,557
Owner investments	$0	$0	$45,000	$45,000
Withdrawals by owner	$0	($13,200)	$0	($13,200)
Net income (loss)	$34,725	$47,925	($10,275)	$2,925
End of the year—Equity	$97,282	$97,282	$97,282	$97,282

• Working

	a.	b.	c.	d.
Beginning of the year—Equity	=109500-46943	=109500-46943	=109500-46943	=109500-46943
Owner investments	0	0	45000	45000
Withdrawals by owner	0	=-1100*12	0	=-1100*12
Net income (loss)	=97282-62557	=13200+97282-62557	=97282-62557-45000	=97282+13200-45000-62557
End of the year—Equity	=163500-66218	=163500-66218	=163500-66218	=163500-66218