At the end of 2001, Kazlo Company has total assets and liabilities at $40,000 and $13,000, respectively. Kazlo reported net income for 2002 in the amount of $10,000. How much is stockholders’ equity at the end of 2002?
Could somebody explain how this is done?
2006-09-21 11:31:48 · 6 answers · asked by J R 2 in Business & Finance ➔ Taxes ➔ United States
Assets = Liabilites + Owner's Equity
2006-09-21 11:40:39 · answer #1 · answered by sassytxlassie 2 · 1⤊ 0⤋
A company can purchase Assets (eg goods & services), made possible through:
- owner's lending to the company in the form of equity, and;
- Liabilities in the form of borrowings from outsiders of the company in the form of debt capital, loans, debentures, preference shares.
Assets ( what the company bought with equity and incurred borrowings to generate future cash and cash equivalents ) = Equity ( owner's contribution of cash and cash equivalents to the company; inversely, what the company owes the owners ) + Liabilities ( what the company owes others, other than the owners of the company, in cash and cash equivalents )
Keeping in mind that:
the Balance Sheet is the picture showing all the wealth and all the "credit expenses" that will fall due for payment at a future point in time ( Accumulated total of all assets, liabilities, equities ) since the commencement of trade in 2001, how much then does the company own to this date (from 2001 to 2002)?
In 2001, the company owns $40,000 of say, goods that are assets, it also owes other parties $13,000.
In 2002, the company made $10,000, being an asset to the company. Recap:
2001: Assets $40,000
2002: Assets $10,000
2001: Liability $13,000
2002: Liability $ none
So how much is the company now worth to the owners (Equity), after deduction of items that will become due for payment in the future ?
2006-09-22 05:48:24 · answer #2 · answered by pax veritas 4 · 0⤊ 1⤋
BOY (Beg of Yr) 2002 Assets equal 40,000. Made 10,000. Assets for EOY 2002 are now 50,000. The assumption with this question is that the liabilities remained the same. So the stockholders equity for EOY (end of year) would be 40,000 + 10,000 - 13,000 = 37,000.
2006-09-22 07:41:48 · answer #3 · answered by extra_37 4 · 1⤊ 0⤋
Assets are what the company owns. Liabilities are what they owe. So the company started 2002 with 27,000 of something. They added 10,000 so the value is $37,000. Of course this company wouldn't actually have stocks--at least not that would be easily found.
2006-09-21 18:41:21 · answer #4 · answered by Nelson_DeVon 7 · 0⤊ 0⤋
Do your own homework and be aware that there are people on Answers who will deliberately give you the wrong info anyway just to make you fail.
Open your book and study. You can't go running to the internet to ask strangers just because you might have to think for more than thirty seconds and actually learn something. If you don't know the answers for the test you should fail the test. That's what tests are for--to determine if you're adequately learning the material to move forward with the education.
2006-09-21 18:38:00 · answer #5 · answered by misslabeled 7 · 0⤊ 1⤋
sassytxla... gave you the correct formula. If you can't find the answer with that, your not going to pass the test.
2006-09-21 19:13:45 · answer #6 · answered by STEVEN F 7 · 0⤊ 0⤋