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If assets at the end of the period are $100,000, owners' equity at the beginning of the period is $50,000, liabilities at the end of the period are $20,000 and revenue is $85,000, what must expenses be?
If assets at the end of the period are $100,000, owners' equity at the beginning of the period is $50,000, liabilities at the end of the period are $20,000 and revenue is $85,000, what must expenses be?
Expert Solution
The expense for the period is $55,000.
Explanation: The expense for the period is $55,000, which has been computed by deducting the net income form the sales revenue.
Working Note 1:The ending equity for the period is $80,000 ($100,000 - $20,000).
Working Note 2:The increase in equity during the period is $30,000 ($80,000 - $50,000).
Working Note 3:The net income for the period is $30,000 as the only income could increase the equity hence net income for the period is $30,000.
Working Note 4:The expense for the period is $55,000 ($85,000 - $30,000).
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