Computation of Assets, Liabilities, and Owners' Equity After a Series

question 107

Essay

Computation of assets, liabilities, and owners' equity after a series of transactions. On April 30, 2009, the balance sheet of China Collectibles showed total assets of $700,000, total liabilities of $400,000, and owners' equity of $300,000. The following transactions occurred in May of 2009:
(1) Capital stock was issued in exchange for $165,000 cash.
(2) The business purchased equipment for $360,000, paying $160,000 cash and issuing a note payable for $200,000.
(3) The business paid $70,000 of its accounts payable.
(4) The business collected $54,000 of its accounts receivable.
Compute the following as of May 31, 2009:
(A.) Total assets $___________
(B.) Total liabilities $___________
(C.) Owners' equity $___________

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Definitions:

Cash

A company's most liquid asset, consisting of currency held and deposits in bank accounts, used for transactions or as reserve for future payments.

Liabilities

Economic responsibilities or liabilities a corporation has towards others, necessitating settlement over time by transferring assets such as cash, products, or services.

Return on Assets

A financial ratio that measures the efficiency of a company's use of its assets in generating profit.

Net Income

The net profit of a company calculated by deducting expenses and taxes from its total income.