What is the amount for drawings and ending capital for the following?
Information related to the proprietorship of Laura Mills, lawyer, for the year ended January 31, 2003, is presented below:
Legal Fees Earned - $360 000
Total Expenses - $205 000
Assets, Feb. 1 2002 - $85 000
Liabilities, Feb. 1 2002 - $62 000
Assets, Jan. 31 2003 - $168 000
Liabilities, Jan. 31 2003 - $70 000
Drawings - ?
***QUESTION: What is the amount for drawings and ending capital? I don't know how to solve this problem.
I know the formula:
Beginning Capital + Inventory - Drawings + Net Income = Ending Capital
This is what I have so far:
23 000 + Inventory - Drawings + 155 000 = Ending Capital
Now what?
To determine the amount for drawings and ending capital, we can start by rearranging the formula:
Ending Capital = Beginning Capital + Net Income - Inventory + Drawings
Now let's plug in the given information into the rearranged formula:
Beginning Capital = Assets, Feb. 1 2002 - Liabilities, Feb. 1 2002
= $85,000 - $62,000
= $23,000
Net Income = Legal Fees Earned - Total Expenses
= $360,000 - $205,000
= $155,000
Inventory is not given in the information. If we assume that there is no change in inventory, we can leave it out of the calculation.
So, the rearranged formula becomes:
Ending Capital = $23,000 + $155,000 - 0 + Drawings
Since we are trying to find the amount for drawings and ending capital, we need more information to determine the value of drawings, as the information provided does not specify it.