A new corporation ended its first year of operations with assets of $100,000,liabilities of $75,000,and contributed capital (common shares)of $10,000.What was the corporation's profit for the year?
A)$25,000
B)$65,000
C)$90,000
D)$75,000
E)$15,000

Question

Quizplus · Accepted Answer

The corporation's profit can be calculated using the accounting equation: Assets = Liabilities + Equity. Equity is made up of contributed capital and retained earnings (profit). Given assets of $100,000 and liabilities of $75,000, equity is $25,000. Since contributed capital is $10,000, the profit (retained earnings) is $25,000 - $10,000 = $15,000.

A New Corporation Ended Its First Year of Operations with Assets