Ramos Inc. has total assets of $1,000 and total liabilities of $450 on December 31, 20Y6. Assume that assets increased by $130 and liabilities decreased by $25 during 20Y7. What would owner's equity be as of December 31, 20Y7?

The owner's equity be as of December 31, 20Y7 is $705

Explanation:

In this question, we apply the accounting equation which is given below

Total assets = Total liabilities + shareholder's equity

The question has said that the liabilities are decreased and the assets are increased.

So, the new asset is = total assets + increased amount

= $1,000 + $130

= $1,130

And, So, the new liability is = total liabilities - decreased amount

= $450 - $25

= $425

So, the shareholder equity would be equal to

= $1,130 - $425

= $705

Hence, the owner's equity be as of December 31, 20Y7 is $705