Question

Baldwin earned revenue of $182,141,415 and had expenses of $169,112,777. This will cause which of the following changes in equity? Equity will decrease $13,028,638 Equity will decrease $169,112,777 Equity will increase $182,141,415 Equity will increase $13,028,638

Answer 1

Solution :

As per the information given in the question we have

Revenue = $ 182,141,415

Expenses = $ 169,112,777

We know that Revenue - Expenses = Profit  

= $ 182,141,415 - $ 169,112,777 = $ 13,028,638

The profit earned shall be added to retained earnings, which is a component of Equity. Thus will result in an increase in the value of equity by the amount of Profit earned.

Thus, in effect the Equity will increase by $ 13,028,638

The solution is Option 4 : Equity will increase $ 13,028,638