Robinson starts a plumbing service named Crusoe Waterworks. Transactions of Crusoe Waterworks during the first year of operations are given below:
A. Robinson deposited $7,000 into a new checking account for the business and recorded the capital contribution.
B. Paid $4,000 cash for equipment to be used for plumbing repairs.
C. Borrowed $30,000 from a local bank and deposited the money in the checking account.
D. Paid $800 rent for the year.
E. Purchased $900 of office supplies on account.
F. Completed a plumbing repair project for a local lawyer and received $3,500 cash.
Calculate the amount of total owner's equity after recording the transactions.

Question

Quizplus · Accepted Answer

Owner's equity is calculated as the initial capital contribution plus any net income (revenues minus expenses) minus any withdrawals. Robinson's initial capital contribution is $7,000. The net income from the transactions is $3,500 (revenue from the plumbing repair project) minus $800 (rent expense), resulting in $2,700. Therefore, the total owner's equity is $7,000 + $2,700 = $9,700.

Robinson Starts a Plumbing Service Named Crusoe Waterworks