For the financial year ending 30 June,Sunset Ltd had a beginning balance for equity of $180 000 and an ending balance of $175 000.During the year the owner withdrew $120 000 for private use.How much profit did Sunset Ltd earn during the year?
A) $5 000
B) $115 000
C) $125 000
D) $60 000

Question

Quizplus · Accepted Answer

The profit can be calculated by adjusting the change in equity for the owner's withdrawals. The equity decreased by $5,000 ($180,000 - $175,000), but since the owner withdrew $120,000, the profit must be $115,000 to account for both the decrease in equity and the withdrawals.

For the Financial Year Ending 30 June,Sunset Ltd Had a Beginning