Cornelia's Closet has the following assets and liabilities for the dates given: October 1October 31 Cash$40,00060,000Accounts Receivable 40,00038,000Accounts Payable 6,000 ?Also, its net income, for October 1 through October 31 was $20,000 and there were no stock issuances or dividends. Determine the equity at both October 1 and October 31.
What will be an ideal response?
October 1st Equity = $74,000; October 31st Equity = $94,000
Total assets:
| October 1 | October 31 |
| Cash | $40,000 | 60,000 |
| Accounts Receivable | 40,000 | 38,000 |
| Total assets | $80,000 | $98,000 |
At October 1:
Assets = Liabilities + Equity
$80,000 = $6,000 + Equity
Equity = $74,000
At October 31:
| Equity, October 1 | $74,000 |
| Plus October net income | 20,000 |
| Equity, October 31 | $94,000 |
Assets = Liabilities + Equity
$98,000 = $4,000 + $94,000
Liabilities = $4,000
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