At September 1, 2010, Crews Co. reported owner's equity of $136,000. During the month, Crews generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and withdrew cash of $2,000. What is the amount of owner's equity at September 30, 2010?

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Quizplus · Accepted Answer

Owner's equity increases by the net income (revenues - expenses) and decreases by withdrawals. Net income is $8,000 ($20,000 - $12,000). After accounting for the withdrawal of $2,000, the increase in equity is $6,000. Therefore, the owner's equity at September 30, 2010, is $142,000 ($136,000 + $6,000). The equipment purchase does not directly affect owner's equity.