Book 1 - Chapter 14

14-1. Statement of owner’s equity:

David Running-Elk, M.D.

Statement of Owner’s Equity

For the Month Ended July 31, 2008

David Running-Elk, Capital, July 1, 2008 $ –0–

Add:	Initial investment by owner	$37,000
	Net income	1,450
	Subtotal		38,450
Less:	Withdrawals		(1,000)
David Running-Elk, Capital, July 31, 2008

(The statement of owner’s equity explains the David Running-Elk, Capital,
balance of $37,450 on the balance sheet.)

LG 14-2. As before, with any “missing information” financial statement problem, there are two
good ways to set up the problem and identify what you need to do. You can either:

a. Prepare a statement using the amounts available, so you can identify what is missing, or . . .

b. You can use the formula relationship that the statement is based on.

a. A statement using the amounts available:

West Valley Company

Statement of Owner’s Equity

For the Month Ended July 31, 2008

Lucy Palangian, Capital, January 1, 2008 $ 3,880

Add:	Investment by owner	$15,000
	Net income/loss	?
	Subtotal
Less:	Withdrawals		(53,000)
Lucy Palangian, Capital, December 31, 2008

  b.  Use the formula that the statement is based on: beginning balance + (net income/(loss) +
        investments – withdrawals) = ending balance. Filling in what you know: $3,800 + net income/
        (loss) + $15,000 – $5,300 = ending balance.

       Reviewing the information, you see that because you know total assets and total liabilities
       on December 31, you can calculate the balance of owner’s capital as A – L = OE, or
       $41,000 – $37,000 = $4,000 on December 31.

Learning Goal 14

SOLUTIONS

Learning Goal 14: Identify and Prepare a Statement of Owner’s Equity

Home

Home || Book Publications || Professor’s Office || Student Info & Resources || Useful Links

Worthy & James Publishing is a provider of basic accounting books covering fundamental accounting principles, business accounting, and business math. Topics in financial accounting and business accounting covered include the balance sheet, the income statement, financial ratios, and bank reconciliation.