Palmer Hand Clinic has the following accounts and balances:
Cash, $2,350
Accounts Receivable, $280
Professional Equipment, $1,200
Office Equipment, $6,700
Accounts Payable, $4,380
P.Palmer, Capital, $2,000
Income from Services, $6,000
Rent Expense, $1,850
What is the amount of owner's equity?

Question

Palmer Hand Clinic has the following accounts and balances: 
Cash, $2,350
Accounts Receivable, $280
Professional Equipment, $1,200
Office Equipment, $6,700
Accounts Payable, $4,380
P.Palmer, Capital, $2,000
Income from Services, $6,000
Rent Expense, $1,850
What is the amount of owner's equity?

Quizplus · Accepted Answer

Owner's equity is calculated by adding the owner's capital account to the net income and subtracting any withdrawals (not mentioned here). Net income is calculated by subtracting expenses from revenues. Here, net income = Income from Services ($6,000) - Rent Expense ($1,850) = $4,150. Adding this to P.Palmer, Capital ($2,000) gives us $6,150 as the owner's equity.

Palmer Hand Clinic Has the Following Accounts and Balances