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If a company’s total assets are $1,000,000 and total liabilities are $600,000, w

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Question: If a company’s total assets are $1,000,000 and total liabilities are $600,000, what is its equity?

Options:

  1. $200,000
  2. $300,000
  3. $400,000
  4. $500,000

Correct Answer: $400,000

Solution: 

Equity is calculated as total assets minus total liabilities. Thus, $1,000,000 - $600,000 = $400,000.

If a company’s total assets are $1,000,000 and total liabilities are $600,000, w

Practice Questions

Q1
If a company’s total assets are $1,000,000 and total liabilities are $600,000, what is its equity?
  1. $200,000
  2. $300,000
  3. $400,000
  4. $500,000

Questions & Step-by-Step Solutions

If a company’s total assets are $1,000,000 and total liabilities are $600,000, what is its 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 equity, which is: Equity = Total Assets - Total Liabilities.
  • Step 4: Substitute the values into the formula: Equity = $1,000,000 - $600,000.
  • Step 5: Perform the subtraction: $1,000,000 - $600,000 = $400,000.
  • Step 6: Conclude that the company's equity is $400,000.
  • Accounting Equation – The fundamental accounting equation states that Assets = Liabilities + Equity, which can be rearranged to find equity.
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