Question

Bishop, Inc., is obligated to pay its creditors $7,800 during the year. a. What is the market value of the shareholders’ equity if assets have a market value of $9,400? (Do not round intermediate calculations.) b. What is the market value of the shareholders’ equity if assets equal $6,700? (Do not round intermediate calculations.)

Answer 1

Answer:

(a) $1,600

(b) $0

Explanation:

Given that,

Total liabilities = $7,800

(a) According to the accounting equation,

Total assets = Total liabilities + Stockholder's equity

$9,400 = $7,800 + Stockholder's equity

$9,400 - $7,800 = Stockholder's equity

$1,600 = Stockholder's equity

(b) Total assets = Total liabilities + Stockholder's equity

$6,700 = $7,800 + Stockholder's equity

$6,700 - $7,800 = Stockholder's equity

$0 = Stockholder's equity