Problem: For the following four cases, use the accounting equation to compute the missing quantity.
Note: I was given four cases but apparently I am missing something. For example the first case states:
$20,000 assets, $8,000 liabilities, and $3,500 in Retained Earnings. Find the Captial stock.
I know that assets = liabilities plus owner's equity. So would I subtract $11,500 from $20,000? How would i know how to find the capital stock?
In the other problems I would have to find the assets, libiabilties, or retained earnings.
To solve the given problem, you can use the accounting equation, which states that Assets = Liabilities + Owner's Equity.
In this case, you are given:
Assets = $20,000
Liabilities = $8,000
Retained Earnings = $3,500
You need to find Capital Stock.
To find the Capital Stock, you need to rearrange the accounting equation as follows:
Owner's Equity = Assets - Liabilities
Substituting the known values:
Owner's Equity = $20,000 - $8,000
Owner's Equity = $12,000
Now, you can find the Capital Stock by considering that Owner's Equity consists of Capital Stock and Retained Earnings:
Capital Stock + Retained Earnings = Owner's Equity
Substituting the known values:
Capital Stock + $3,500 = $12,000
To find the Capital Stock, you can rearrange the equation:
Capital Stock = Owner's Equity - Retained Earnings
Capital Stock = $12,000 - $3,500
Capital Stock = $8,500
Therefore, the Capital Stock in this case is $8,500.
To solve the other problems, follow a similar approach by rearranging the accounting equation and using the given information to find the missing quantity.