Question

Gooseberry Clinic had total assets of $750,000 and an equity balance of $400,000 at year ending June 30, 2018. One year later, at year ending June 30, 2019, the clinic had $925,000 in assets and $450,000 in equity. a.What was Gooseberry Clinic’s dollar growth in assets during 2019?b. How was this growth financed? (Include $$ calculations of each capital category.)

Answer 1

a). Dollar growth in assets = Assets at year end 2019 - Assets at year end 2018

= 925,000 - 750,000 = 175,000

b). Total assets = liabilities + equity

Growth in liabilities = (Total assets - equity) at year end 2019 - (Total assets - equity) at year end 2018

= (925,000 - 450,000) - (750,000 - 400,000) = 125,000

Growth in equity = equity at year end 2019 - equity at year end 2018 = 450,000 - 400,000 = 50,000

Total growth = 125,000 + 50,000 = 175,000

Thus, growth in assets is completely financed by growth in liabilities and equity.