Bob Jones is a sole proprietor who began his business in 2019 with $20,000 cash.During the year 2019,he earned revenues of $180,000,incurred expenses of $75,000,and withdrew $120,000.Which of the following is true for the sole proprietorship?
A)The net income is $120,000.
B)The drawing account will be closed with a credit of $100,000.
C)The owner's equity at the end of 2019 is $125,000.
D)The capital account balance at the end of year 2019 is $5,000.

Question

Quizplus · Accepted Answer

The net income is calculated as revenues minus expenses, which is $180,000 - $75,000 = $105,000. The owner's equity at the beginning was $20,000, plus the net income of $105,000 gives $125,000, then subtracting the withdrawals of $120,000 leaves an ending capital account balance of $5,000.

Bob Jones Is a Sole Proprietor Who Began His Business