The balance sheet for Greeley Contracting shows assets totaling $207,000 and liabilities totaling $95,000. Which of the following statements is correct?
A) Owners' equity equals $182,000.
B) Current assets are worth $92,000.
C) Net income for the period is $112,000.
D) Owners' equity equals $112,000.

Question

Quizplus · Accepted Answer

The fundamental accounting equation states: Assets = Liabilities + Owners' equity. By subtracting liabilities from both sides of the equation, we arrive at: Assets - Liabilities = Liabilities - Liabilities + Owners' equity. The Liabilities terms on the right side of the equation cancel out. The equation becomes Assets - Liabilities = Owners' equity. Substituting the information provided, $207,000 - $95,000 = $112,000.

The Balance Sheet for Greeley Contracting Shows Assets Totaling $207,000