 Hello, in this presentation we will work short answer calculation questions, types of test questions that could be on a multiple choice type question or short answer questions with some limited calculations. First question, company had beginning equity of $83,000, revenue of $123,000, expenses of $76,000, and withdrawals by owner of $10,100. Calculate the ending equity. We will start here with beginning equity and we had beginning equity of $83,000. Revenue is going to increase equity. Remember that net income increases equity net income calculated as revenue minus expenses. Therefore revenue increases net income and increases equity. Then we have expenses which would decrease equity. Remember that net income would increase equity and net income calculated as revenue minus expenses mean that expenses will decrease net income and therefore decrease equity. I'm going to put that in as a negative. Then we have the withdrawals. I'm just going to call it draws. That's going to decrease equity, equity representing what is owed to the owner. Net income, I mean draws, not part of net income, but will still bring equity down representing what the owner has basically drawn out of the company. If it was a corporation, it would be dividends that would be leaving the company going to the shareholders. Therefore I'm going to put this as a negative $10,100. Then the ending balance in equity would be the sum. Now I'm summing these up meaning it's going to add the $83,000 plus the $123,000 minus the $76,000 minus the $10,100. That being the $119,900 here. That's going to be the answer. Remember that when we're looking at equity, we're talking about beginning balance plus net income. Net income calculated as increasing in revenue, decreasing in expenses, and then draws are going to decrease the equity as well, although not part of the net income calculation that will give us the ending equity, so beginning equity plus revenue minus expenses minus draws. Next question. If the assets of a business increased $111,000 during a period of time and its liabilities increased by $78,000 during the same period, equity in the business must have. This is going to be an accounting equation problem. It's a little bit tricky because we're talking about the timing rather than just a point in time, but it's similar to us recording a transaction where we're recording what is happening over a certain time period on the aggregate on the entire accounting equation. Therefore, we can just use that accounting equation to calculate. We'll start by writing the accounts integration. I'm going to abbreviate assets. Let's put it over here. I'm going to put assets equal the liabilities plus the equity. Then we'll just say that the assets are going to be increasing by $111,000 during the time period. That's going to equal the liabilities increasing $78,000 and equity plus equity and equals. We're going to solve here for equity. We're going to subtract the $78,000 from both sides of our equation, $78,000, $78,000. Then if we do the subtraction, do the math, $111,000 minus the $78,000 provides us with $33,000, then equaling the liabilities, which of course if we do the math and subtract out the $78,000 minus the $78,000, we get zero plus the equity. Therefore, we could say that the equity equals $33,000. If we just turn that back around, equity equals the $33,000 for this problem. Next question. If the liabilities of a company increase $80,000 during the period of time and equity in the company decreases $22,000 during the same period, what was the effect on the assets? It's going to be a similar type of problem. We're going to put this into the accounting equation, not worrying about the fact that it's not a static point in time, but recognizing the change over a time frame and also being careful with the fact of course that we have this decrease happening here as we put this information into the accounting equation. We will start with our accounting equation of assets equaling liabilities plus the equity. If the company increases $80,000 during the year for the liabilities, so liabilities are increasing $80,000 and the equity is decreasing, so I'm going to say plus and then a negative equity of $22,000. So I'm going to keep the accounting equation the same and put negative into our equation. So it's plus a negative $22,000 that we're going to have to deal with. That's going to be equaling to the assets here. Now whenever I see a sign that's going to be the same like we have two signs together, we have a negative and a positive between the 80 and the 22. I would convert that to just a negative. A negative and a positive together, if we convert that to just one sign would be the same as if we were saying 80,000 plus a negative 22. It's the same as saying 80,000 minus the 22,000 and then deal with our equation from there and then of course all we have is the subtraction problem of 80,000 minus 22,000 providing us with the assets of $58,000. Next question. Company receives $12,200 from the owner to establish a proprietorship. The effect on the accounting equation would be. So we're going to record the transaction in terms of the accounting equation and see the effect on the accounting equation. I'm going to write down the accounting equation of assets equal liabilities plus the equity. Then we're going to put the transaction in terms of the accounting equation. So company received $12,200 from owner to establish a proprietorship. So first question is cash affected? I would say yeah, we received I'm assuming cash in this case of $12,200. So we're going to say cash is going up in terms of the accounting equation, that's an asset. So I'm going to say that $12,200 is going up here. Then we're going to say who put the money in the other side. The other account that would be affected is the capital account because the owner put the money in and therefore we would be on the other side over here on the equity side. We know that that has to increase for a couple different reasons. One, this side of the account went up and therefore this is on the other side of the equal sign and it's what is affected then it must be going up. And two, because equity represents the net value or what is owed to the owner. Therefore, if the owner put more money in, more money is due back to the owner and must be increasing the equity. Note that if this is a test question in terms of a multiple choice question, they can ask you many different things here. They can ask you, they can have multiple choice questions saying assets went up and equity went up or they can have assets went up and say equity went down. Those types of test questions, they could ask you just one side in terms of a correct answer and just list out what is correct or not. Did assets go up? Did assets go down? Did liabilities go up? Did liabilities go down? Did equity go up or down? And those are some formats you might see just so I would write down no matter what they ask, the entire thing so that you're ready for whatever they ask. And in so doing you might feel that you're doing more work but by writing the whole thing down you're kind of double checking yourself. You're using the double entry accounting system as a check to check yourself. Next question. Use the following information as of December 31st to determine equity. We have cash, we have building, we have equipment, we have liabilities of 58,176,002,007, and 142,000 respectively. First we will write down the accounting equation of assets equaling liabilities plus equity. Then we're just going to list the accounts that are going to be assets liabilities and equities so we could say cash is going to be an asset of 58,000. We're going to say that the building is going to be an asset of 176,000 equipment will be an asset of 207,000 and then we've got liabilities, we have liabilities, they just listed as liabilities so we'll just put those in the liabilities 142,000 not going to tell us what those liabilities are in terms of payables or whatnot. And then we'll just sum that up so we're going to say the assets then are adding up to the 58,000 plus this 176,000 plus the 207,000 or 441,000 that will then equal the liabilities which is just going to be that 142,000 plus the equity which is just going to be what we're looking for. So we're going to subtract the 142,000 from each side 142,000 and then if we do the math we're going to say that 441,000 minus 142 is going to be equal to the 299,000 which will equal if we do the math here we're taking the 142 minus 142 equaling to 0 and that's going to be equal to E therefore E is equal to the 299,000 and that's equity of course equity is equal to the 299,000.