Use the following information for questions 127-129.
Carla's Computer Repair Shop started the year with total assets of $270,000 and total liabilities of $180,000. During the year, the business recorded $450,000 in computer repair revenues, $255,000 in expenses, and Carla withdrew $45,000.
-Carla's Capital balance changed by what amount from the beginning of the year to the end of the year?
A) $45,000
B) $195,000
C) $90,000
D) $150,000

Question

Quizplus · Accepted Answer

To calculate the change in Carla's Capital balance, we need to use the accounting equation: Assets = Liabilities + Owner's Equity. At the beginning of the year, the equation is: 
$270,000 = $180,000 + Carla's Capital 
Solving for Carla's Capital, we get:
Carla's Capital = $90,000 
At the end of the year, we need to calculate the ending balance of assets, liabilities, and owner's equity: 
Assets = Beginning Assets + Revenues - Expenses - Withdrawals 
Assets = $270,000 + $450,000 - $255,000 - $45,000 
Assets = $420,000 
Liabilities = $180,000 (unchanged) 
Owner's Equity = Assets - Liabilities 
Owner's Equity = $420,000 - $180,000 
Owner's Equity = $240,000 
Therefore, the change in Carla's Capital balance is:
$240,000 - $90,000 = $150,000 
So, the answer is D, $150,000.

Use the Following Information for Questions 127-129