Reese's Company reported equity of $22,000 on its December 31, 2019 balance sheet. The following information is available for the year ended December 31, 2020 What are the total assets of Reese's Company on December 31, 2020?

Question

Reese's Company reported equity of $22,000 on its December 31, 2019 balance sheet. The following information is available for the year ended December 31, 2020  What are the total assets of Reese's Company on December 31, 2020?

Quizplus · Accepted Answer

In order to determine the total assets of the company, we need to use the basic accounting equation:

Assets = Liabilities + Equity

We know that equity at the end of 2019 was $22,000. During the year ended December 31, 2020, the company had net income of $15,000, paid dividends of $5,000, and issued $5,000 of common stock.

Therefore, equity at the end of 2020 is:

$22,000 + $15,000 - $5,000 + $5,000 = $37,000

Now, we can use the accounting equation to solve for assets:

Assets = Liabilities + Equity

We don't have any information about liabilities, but we know that equity at the end of 2020 is $37,000.

Therefore, Assets = $37,000 + Liabilities

We don't know the exact amount of liabilities, but we do know that:

Assets + Liabilities = Equity 
$47,000 + Liabilities = $37,000

So, Liabilities = $10,000

Now we can use the accounting equation to solve for assets:

Assets = Liabilities + Equity 
Assets = $10,000 + $37,000 
Assets = $47,000

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