| Reinforcement Problems | ||
| LG | 4-1. | |
|
Total
Assets = Total Liabilities + Owner’s Equity
|
||||
| a. Mohawk
Company (June 30, 2008) |
$251,000 | $200,000 | A − L = OE (OE = $51,000) |
|
| b. Nez
Perce Company (December 31, 2008) |
A = L + OE (A = $40,700) |
$18,500 | $22,200 | |
| c. Lakota
Company (October 31, 2007) |
$50,000 | A − OE =
L (L = $15,000) |
$35,000 | |
| d. Modoc
Company (March 31, 2007) |
A = L + OE (A = $225,000) |
$45,000 | $180,000 | |
| e. Cherokee
Company (April 30, 2008) |
$200,000 | $251,000 | A − L = OE (OE = − $51,000) |
|
| f. Seminole
Company (December 31, 2008) |
$815,000 | A − OE =
L (L = $170,000) |
$645,000 | |
| Meaning of situation (e): Yes,
this is not unusual. It means that a business has consumed so many assets that there are not enough assets left to pay the creditors. This negative owner’s equity means that the owner will have to invest $51,000 more so the business can pay all the liabilities, if the business were to be terminated today. |
 |
Learning
Goal 4
SOLUTIONS
|
Learning
Goal 4: Use the Accounting Equation to Show the Condition
|
S1
|
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