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Inspirational Inc. is a motivational consulting business. At the end of its accounting period, October 31, 20Y2, Inspirational has assets of $815,910 and liabilities of $257,830. Using the accounting equation and considering each case independently, determine the following amounts:a. Stockholders' equity as of October 31, 20Y2. $b. Stockholders' equity as of October 31, 20Y3, assuming that assets increased by $128,910 and liabilities increased by $77,510 during 20Y3. $c. Stockholders' equity as of October 31, 20Y3, assuming that assets decreased by $64,460 and liabilities increased by $22,850 during 20Y3. $d. Stockholders' equity as of October 31, 20Y3, assuming that assets increased by $107,700 and liabilities decreased by $40,800 during 20Y3. $e. Net income (or net loss) during 20Y3, assuming that as of October 31, 20Y3, assets were $1,028,050, liabilities were $167,260, and no additional common stock was issued or dividends paid. $

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Anthougoidn

Answer:

Inspirational Inc.

a. Stockholders' equity as of October 31, 20Y2

= $558,080

b. Stockholders' equity as of October 31, 20Y3, assuming that assets increased by $128,910 and liabilities increased by $77,510 during 20Y3.

= $609,480

c. Stockholders' equity as of October 31, 20Y3, assuming that assets decreased by $64,460 and liabilities increased by $22,850 during 20Y3.

=$470,770

d. Stockholders' equity as of October 31, 20Y3, assuming that assets increased by $107,700 and liabilities decreased by $40,800 during 20Y3.

= $706,580

e. Net income (or net loss) during 20Y3, assuming that as of October 31, 20Y3, assets were $1,028,050, liabilities were $167,260, and no additional common stock was issued or dividends paid.

= $302,710

Explanation:

1) Data and Calculations:

a) Assets of $815,910

Liabilities of $257,830

Stockholders' equity = $558,080 ($815,910 - $257,830)

b) Assets of $944,820 ($815,910 + $128,910)

Liabilities of $335,340 ($257,830 + $77,510)

Stockholders' equity = $609,480 ($944,820 - $335,340)

c) Assets of $751,450 ($815,910 - $64,460)

Liabilities of $280,680 ($257,830 + $22,850)

Stockholders' equity = $470,770 ($751,450 - $280,680)

d) Assets of $923,610 ($815,910 + $107,700)

Liabilities of $217,030 ($257,830 -$40,800)

Stockholders' equity = $706,580 ($923,610 - $217,030)

e) Assets of $1,028,050

Liabilities of $167,260

Stockholders' equity = $558,080

Net Income = $302,710 (Assets - (Liabilities + Equity))

f) These different transactions and changes show that the accounting equation is always in balance.  This means that the assets of Inspirational Inc. will always be equal to the liabilities + equity.  The reason for this situation is that assets are funded by either liabilities or equity or a combination of these two financing sources.

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