Sinoyianis Realty Company had the following balance sheet accounts and balances:
-If the equipment were sold for $14,000,what would be the total of owner's equity?

Question

Sinoyianis Realty Company had the following balance sheet accounts and balances: 
-If the equipment were sold for $14,000,what would be the total of owner's equity?

Quizplus · Accepted Answer

To calculate owner's equity, we must first calculate total assets and total liabilities.

Total assets = $21,000 (cash) + $34,000 (accounts receivable) + $28,000 (inventory) + $14,000 (equipment) = $97,000

Total liabilities = $18,000 (accounts payable) + $23,000 (notes payable) = $41,000

Owner's equity = Total assets - Total liabilities = $97,000 - $41,000 = $56,000

If the equipment were sold for $14,000, it would increase cash by $14,000 and decrease equipment by $14,000.

New total assets = $21,000 (cash) + $34,000 (accounts receivable) + $28,000 (inventory) + $0 (equipment) + $14,000 (cash from equipment sale) = $97,000

Total liabilities remain the same at $41,000.

New owner's equity = Total assets - Total liabilities = $97,000 - $41,000 = $56,000

Therefore, the total of owner's equity would remain the same at $40,000.

Sinoyianis Realty Company Had the Following Balance Sheet Accounts and Balances