Grapefruit Services started the year with total assets of $110,000 and total liabilities of $55,000. The company is a sole proprietorship. The revenues and the expenses for the year amounted to $130,000 and $90,000, respectively. During the year, there were no new capital contributions and the owner withdrew $45,000. What is the amount of owner's equity at the end of the year?

 $50,000

 $130,000

 $45,000

 $90,000

To determine the owner's equity at the end of the year, we need to follow these steps:

1. **Calculate the initial owner's equity** using the accounting equation:
   \[
   \text{Owner's Equity} = \text{Total Assets} - \text{Total Liabilities}
   \]
   Initial equity:
   \[
   \text{Initial Owner's Equity} = \$110,000 - \$55,000 = \$55,000
   \]

2. **Determine the net income** for the year:
   \[
   \text{Net Income} = \text{Revenues} - \text{Expenses}
   \]
   Net income:
   \[
   \text{Net Income} = \$130,000 - \$90,000 = \$40,000
   \]

3. **Calculate the ending owner's equity** considering the net income and the owner's withdrawals:
   \[
   \text{Ending Owner's Equity} = \text{Initial Owner's Equity} + \text{Net Income} - \text{Owner's Withdrawals}
   \]
   Ending equity:
   \[
   \text{Ending Owner's Equity} = \$55,000 + \$40,000 - \$45,000 = \$50,000
   \]

Thus, the amount of owner's equity at the end of the year is **$50,000**.

Do you want more details or have any questions? Here are some related questions:

1. How would the owner's equity change if the withdrawals were only $30,000?
2. What happens to the owner's equity if the company had no net income but still had withdrawals?
3. If the company had additional capital contributions, how would it affect the owner's equity?
4. What is the importance of keeping track of owner's withdrawals in a sole proprietorship?
5. How does net income impact the overall financial position of a sole proprietorship?

**Tip:** In a sole proprietorship, owner's equity is directly affected by the business's net income and the owner's withdrawals or capital contributions.

Learn how to calculate the owner's equity at the end of the year for Grapefruit Services. This problem involves determining changes in owner's equity based on initial assets, liabilities, revenues, expenses, and withdrawals. Understand the impact of net income on owner's equity in a sole proprietorship setup.

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