HRM Consulting Pty Ltd started the year with total assets of $80 000 and total liabilities of $40 000.During the year the business earned $150 000 in income and incurred $95 000 in expenses.Dividends of $20 000 were paid during the year.Equity at the end of the period was:
A) $40 000
B) $45 000
C) $75 000
D) $20 000

Question

Quizplus · Accepted Answer

The equity of the business can be calculated as follows:

Equity = Total Assets - Total Liabilities
Equity = ($80,000 + $150,000 - $95,000) - $40,000
Equity = $135,000 - $40,000
Equity = $95,000

Subtracting the dividends paid during the year:

Equity = $95,000 - $20,000
Equity = $75,000

Therefore, the answer is C) $75,000.

HRM Consulting Pty Ltd Started the Year with Total Assets