The Assets and Liabilities of Rocky's Day Spa on December

question 171

Essay

The assets and liabilities of Rocky's Day Spa on December 31 and its revenue and expenses for the year are listed below. The capital of the owner is $68,000 on January 1. The owner invested an additional $10,000 during the year.? $$\begin{array} { | l | r | l | r | } \hline \text { Accounts payable } & \$ 4,375 & \text { Spa operating expense } & \$ 23,760 \\\hline \text { Accounts receivable } & 8,490 & \text { Office expense } & 2,470 \\\hline \text { Cash } & 13,980 & \text { Spa supplies } & 9,230 \\\hline \text { Fees earned } & 98,435 & \text { Wages expense } & 26,580 \\\hline \text { Spa furniture and equipment } & 56,000 & \text { Drawing } & 38,170 \\\hline \text { Computers } & 2,130 & & \\\hline\end{array}$$ Prepare a statement of owner's equity for the current year ended December 31.

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Definitions:

Suspended Losses

Losses that cannot be deducted in the current year and must be carried forward to future years for deduction under certain tax rules.

Actively Participated

Actively Participated refers to a taxpayer's involvement in the operations and decision-making of an investment or business activity, which may affect tax treatment.

Class Asset

Categories of assets grouped together based on having similar financial characteristics, often used in finance for valuation and risk assessment.

Like-kind Treatment

A tax deferral for exchanges of business or investment properties of similar nature, per Internal Revenue Code Section 1031.