If a company has total assets of $1,000,000 and total liabilities of $600,000, w
Practice Questions
Q1
If a company has total assets of $1,000,000 and total liabilities of $600,000, what is the owner's equity?
$400,000
$600,000
$1,000,000
$200,000
Questions & Step-by-Step Solutions
If a company has total assets of $1,000,000 and total liabilities of $600,000, what is the owner's equity?
Step 1: Identify the total assets of the company, which is $1,000,000.
Step 2: Identify the total liabilities of the company, which is $600,000.
Step 3: Use the formula for owner's equity, which is Owner's Equity = Total Assets - Total Liabilities.
Step 4: Substitute the values into the formula: Owner's Equity = $1,000,000 - $600,000.
Step 5: Perform the subtraction: $1,000,000 - $600,000 = $400,000.
Step 6: Conclude that the owner's equity is $400,000.
Accounting Equation – The fundamental accounting equation states that Assets = Liabilities + Owner's Equity, which can be rearranged to find Owner's Equity.
