The question is Burlin company starts the year with $188,000 in assets and $37,600 in liabilities. Net income for the year is $47,000, and no dividends are paid. How much is owners' equity at the end of the year?
So what I thought what i would have to do is add the 188,000 and the net income (47,000) to get $235,000. Then I would take the equation assets = liability + owners' equity. I would plugin $235,000 = $37,600 + owners' equity. Which I would find out by subtracting the 37,600 from the other side and end up with $197,400 for owners' equity. Am I doing this right or am I wrong?
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YES, YOU ARE.
You are on the right track, but there is a slight mistake in your calculation. Let me guide you through the correct steps to find the owners' equity at the end of the year.
1. Start with the assets and liabilities given at the beginning of the year:
Assets = $188,000
Liabilities = $37,600
2. Since no dividends are paid, the net income for the year will be added to the owners' equity. So, add the net income to the owners' equity:
Net income = $47,000
Owners' equity (initial) = Assets - Liabilities = $188,000 - $37,600 = $150,400
Owners' equity (end of the year) = Owners' equity (initial) + Net income
Owners' equity (end of the year) = $150,400 + $47,000 = $197,400
Therefore, the correct answer is $197,400 for the owners' equity at the end of the year.