Zia Company reports the following balance sheet information for 2021:

Question

BlackTom AI · Accepted Answer

To solve this, I will break down the information and track changes in equity across the year.

First, determine the company's equity at the start of the period (1 July 2020): Equity = Assets − Liabilities = 60,000 − 12,000 = 48,000.

Next, determine the company’s equity at the end of the period (30 June 2021): Equity = Assets − Liabilities = 70,000 − 14,000 = 56,000.

Now account for the given changes during 2021: capital contributions (increasing equity) were 3,000 and drawings (reducing equity) were 12,000. Let P be the profit for the year. The relationship of opening equity, additions, profit, and drawings to ending equity is:
Opening Equity + Capital Contributions + Profit − Drawings = Ending Equity
Which translates to: 48,000 + 3,000 + P − 12,000 = 56,000.

Simplify the equation: 48,000 + 3,000 = 51,000; 51,000 − 12,000 = 39,000; so 39,000 + P = 56,000.

Solve for P: P = 56,000 − 39,000 = 17,000.

Now, evaluate the given options:
- a. $11,000: This would imply a smaller year-end equity than shown, not matching the computed ending of 56,000 from 70,000 assets and 14,000 liabilities.
- b. $23,000: This overstates the profit given the equity movements; using the formula would produce a different ending equity.
- c. $8,000: This underestimates profit; inserting 8,000 into the equation would not yield the 56,000 ending equity.
- d. $17,000: This matches the derived profit that reconciles opening and ending equity with the stated contributions and drawings.
- e. $9,000: This is also inconsistent with the calculated figure when plugged into the equity equation.

Therefore, the profit for the year ended 30 June 2021 must have been 17,000. (Note: this conclusion comes from balancing opening equity, capital contributions, and drawings against ending equity.)

MCD2160 - T3 - 2025 MCD2160: Mid Test Practice Quiz

Zia Company reports the following balance sheet information for 2021:

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