Reese's Company reported equity of $22,000 on its December 31,2014 balance sheet.The following information is available for the year ended December 31,2015: What are the total assets of Reese's Company at December 31,2015?

Question

Reese's Company reported equity of $22,000 on its December 31,2014 balance sheet.The following information is available for the year ended December 31,2015:  What are the total assets of Reese's Company at December 31,2015?

Quizplus · Accepted Answer

Since net income is $25,000 and dividends are $3,000, the total increase in equity is $22,000 + ($25,000 − $3,000) = $44,000. Therefore, total assets are $22,000 + $44,000 = $46,000. However, there was a $1,000 loss in the fair value of available-for-sale securities, reducing total assets to $46,000 − $1,000 = $45,000. Adding the $2,000 increase in notes payable (a liability), total assets are $45,000 + $2,000 = $47,000.

Reese's Company Reported Equity of $22,000 on Its December 31,2014