The following amounts are reported in the ledger of Bowers Company: $$\begin{array} { | l | r | }
\hline \text { Assets } & \$ 25,000 \text { (debit) } \
\hline \text { Liabilities } & 15,000 \text { (credit) } \
\hline \text { Retained earnings } & 3,000 \text { (credit) } \
\hline
\end{array}$$ What is the balance in the contributed capital account?
A) $7,000 credit.
B) $8,000 debit.
C) $12,000 credit.
D) $12,000 debit.

Question

The following amounts are reported in the ledger of Bowers Company: $$\begin{array} { | l | r | } 
\hline \text { Assets } & \$ 25,000 \text { (debit) } \
\hline \text { Liabilities } & 15,000 \text { (credit) } \
\hline \text { Retained earnings } & 3,000 \text { (credit) } \
\hline
\end{array}$$ What is the balance in the contributed capital account?
A) $7,000 credit.
B) $8,000 debit.
C) $12,000 credit.
D) $12,000 debit.

Quizplus · Accepted Answer

The balance in the contributed capital account can be determined by the accounting equation: Assets = Liabilities + Shareholders' Equity. Shareholders' Equity is the sum of Retained Earnings and Contributed Capital. Given Assets = $25,000, Liabilities = $15,000, and Retained Earnings = $3,000, we can calculate Contributed Capital as follows: $25,000 (Assets) = $15,000 (Liabilities) + Contributed Capital + $3,000 (Retained Earnings). Thus, Contributed Capital = $25,000 - $15,000 - $3,000 = $7,000.

The Following Amounts Are Reported in the Ledger of Bowers