At December 31 of the Current Year,Martin Consultants Has Assets

question 28

Essay

At December 31 of the current year,Martin Consultants has assets of $430,000 and liabilities of $205,000.Using the accounting equation and considering each case independently,determine the following:
a Stockholders' equity,as of December 31.
b Stockholders' equity,as of December 31 of the next year,assuming that assets increased by $12,000 and liabilities increased by $15,000.
c Stockholders' equity,as of December 31 of the next year,assuming that assets decreased by $8,000 and liabilities increased by $14,000.

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Definitions:

Financial Leverage

The use of borrowed money to multiply financial performance in terms of ROE and EPS.

Shareholders

Individuals or entities that own shares in a corporation, giving them partial ownership and possibly a right to vote at shareholders' meetings.

Capital Employed

The total amount of capital used for the acquisition of profits by a firm or project, including assets and working capital.

Debt

An obligation owed by one party to a second party; in financial terms, it typically refers to money borrowed by one party from another.