In the current year the Budget Hotel earned $100,000 profit. Its assets increased by $120,000 and its liabilities increased by $40,000. What was the value of the owners' contribution to capital or dividend declared and paid during the year?

Question

Quizplus · Accepted Answer

The increase in assets ($120,000) minus the increase in liabilities ($40,000) equals $80,000, which is the net increase in equity. Subtracting the profit ($100,000) from this net increase in equity gives a negative $20,000, indicating a dividend declared and paid of $20,000.

In the Current Year the Budget Hotel Earned $100,000 Profit