Problem 4
A company starts with:
- Assets = 40,000
- Liabilities = 25,000
- Owner’s Equity = 15,000

During the year:
- The company earned 20,000 in revenue.
- It paid 5,000 in expenses.
- The owner withdrew 3,000.

Find:
- Ending Assets and Owner’s Equity

To solve this problem, we will use the **Accounting Equation**:

\[
\text{Assets} = \text{Liabilities} + \text{Owner's Equity}
\]

We will calculate the changes in the company's **Owner’s Equity** based on revenue, expenses, and withdrawals. Then, we will determine the final **Owner's Equity** and **Assets**.

### 1. Initial values
- **Assets** = 40,000
- **Liabilities** = 25,000
- **Owner's Equity** = 15,000

### 2. Changes in Owner's Equity
- **Revenue** increases Owner's Equity by 20,000.
- **Expenses** decrease Owner's Equity by 5,000.
- **Withdrawals** decrease Owner's Equity by 3,000.

Thus, the net change in Owner's Equity is:

\[
\text{Net Change in Owner's Equity} = 20,000 - 5,000 - 3,000 = 12,000
\]

### 3. Ending Owner's Equity
\[
\text{Ending Owner's Equity} = \text{Initial Owner's Equity} + \text{Net Change in Owner's Equity}
\]
\[
\text{Ending Owner's Equity} = 15,000 + 12,000 = 27,000
\]

### 4. Ending Assets
Using the accounting equation, we can calculate the ending assets as follows:

\[
\text{Ending Assets} = \text{Liabilities} + \text{Ending Owner's Equity}
\]
\[
\text{Ending Assets} = 25,000 + 27,000 = 52,000
\]

### Final Answer
- **Ending Assets** = 52,000
- **Ending Owner’s Equity** = 27,000

Would you like more details or have any questions?

Here are 5 related questions:
1. How do liabilities impact the calculation of assets?
2. What if the owner had withdrawn 5,000 instead of 3,000? How would that affect equity?
3. How would a decrease in revenue impact the Owner's Equity?
4. Can expenses ever increase Owner's Equity?
5. How does the accounting equation help maintain financial balance?

**Tip:** Keep track of all inflows and outflows in equity to ensure accurate financial statements.

A company starts with: Assets = 40,000, Liabilities = 25,000, Owner’s Equity = 15,000. During the year: The company earned 20,000 in revenue, paid 5,000 in expenses, and the owner withdrew 3,000. Find the ending Assets and Owner’s Equity.

Learn how to calculate ending assets and owner’s equity using the accounting equation. This problem involves determining changes in owner's equity based on revenue, expenses, and withdrawals. Suitable for students in Grades 11-12 studying accounting or business mathematics.

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