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Aug 31, 2011
Equity Question

If at the beginning of the year, liabilities equal $59,000 and during the year, assets increased by $60,000, and at year-end assets equal $190,000 while Liabilities decreased $14,000 during the year, then I believe the beginning equity would be 71,000 and the ending equity would be 145,000. This is calculated as follows:

Assets = Liabilities + Owner's Equity

So at the beginning of the year the formula would be: 130,000 = 59,000 + 71,000

[assets = 130000 (190000-60000), liabilities = 59000 and equity = 71000 (130000 - 59000)]

While at the end of the year the formula would be: 190,000 = 45,000 + 145,000

[assets = 190000, liabilities = 45000 (59000 - 14000) and equity = 145000 (190000 - 45000)]

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