Question

During its first year of operations, the owner of Roseland Company personally invested $25,000 in the corporation in exchange for common stock and paid dividends of $5,000. The company earned $68,000 of revenues and incurred $32,000 of expenses. At the end of the year, the company owed $24,000 to its creditors. At the end of the year, the company's assets totaled:

Answer 1

Answer:

Assets = 80,000

Explanation:

According to the transaction analysis model:

Assets = Liabilities + Owner's Equity

Owner's equity = Contributed Capital + Retained Earnings

Retained Earnings = Net Income − Dividends

and

Net Income = Income − Expenses

If all substitutions are made the result is referred to as the expanded accounting equation, because it yields the breakdown of the equity component of the equation:

Assets = Liabilities + Contributed Capital + Income – Expenses − Dividends

In the Roseland Company`s case:

Assets = Liabilities + Contributed Capital + Income – Expenses − Dividends

Assets = 24,000 + 25,000 +68,000 - 32,000 – 5,000

Assets = 80,000