At the beginning of the year, Addison Company's assets are $254,000 and its equity is $190,500. During the year, assets increase $80,000 and liabilities increase $44,000. What is the equity at the end of the year?
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To find the equity at the end of the year, we need to determine the change in equity by considering the changes in assets and liabilities.
Equity represents the residual interest in the assets of a company after deducting liabilities. It can be calculated using the following formula:
Equity = Assets - Liabilities
We are given the following information:
- Assets at the beginning of the year = $254,000
- Equity at the beginning of the year = $190,500
- Increase in assets during the year = $80,000
- Increase in liabilities during the year = $44,000
First, let's calculate the equity at the end of the year using the formula mentioned earlier.
Equity at the beginning of the year = $190,500
Assets at the beginning of the year = $254,000
Liabilities at the beginning of the year = Assets at the beginning of the year - Equity at the beginning of the year
Liabilities at the beginning of the year = $254,000 - $190,500
Liabilities at the beginning of the year = $63,500
To find the equity at the end of the year, we need to add the increase in assets and subtract the increase in liabilities from the equity at the beginning of the year.
Equity at the end of the year = Equity at the beginning of the year + Increase in assets - Increase in liabilities
Equity at the end of the year = $190,500 + $80,000 - $44,000
Calculating the above expression, we get:
Equity at the end of the year = $226,500
Therefore, the equity at the end of the year is $226,500.