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16 July, 02:21

When reviewing the balance sheet for Portable Pet Care, Inc., a mobile small animal care business, Ricky noted the following information: Company assets totaling $3.5 million, and liabilities totaling $1.3 million. On paper, the net worth (owners' equity) for this business =

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  1. 16 July, 05:29
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    The net worth (owners' equity) for this business is $2.2 million

    Explanation:

    Net worth: It is also known as owner's equity which is a difference between total assets and total assets.

    In this question, we use the accounting equation which is used to balance the debit and credit side of the balance sheet items.

    So, the accounting equation is

    Total Assets = Total Liabilities + Owner's Equity

    where,

    Company assets are $3.5 million

    And, liabilities is $1.3 million

    Now, apply the above equation to find out the value of the owner's equity

    So, owner equity would be equals to

    = $3.5 million - $1.3 million

    = $2.2 million

    Hence, the net worth (owners' equity) for this business is $2.2 million
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