At the beginning of the year Palette Companys assets were 90

At the beginning of the year, Palette Company\'s assets were $90,000, and it\'s owner\'s equity was $50,000. During the year, assets increased by $30,000 and liabilities increased by $5,000. What was the owner\'s equity at the end of the year?

Solution

Total assets=Total liabilites+Total equity

Total liabilities at beginning=(90,000-50,000)=$40,000

Total assets at end=(90000+30000)=$120,000

Total liabilities at end=(40000+5000)=$45000

Hence owner\'s equity at the end of the year=(120,000-45000)

=$75000.