Expenses Calculation in Accounting

What are the expenses if assets are $225,000, opening equity is $100,000, liabilities are $60,000, and income is $145,000?

a. $80,000

b. $120,000

c. $15,000

d. $40,000

Answer:

The expenses are $80,000. Therefore, the correct option is a.

The relationship between assets, liabilities, and equity is given by the accounting equation:

Assets = Liabilities + Equity

Given the values provided:

Assets = $225,000

Opening Equity = $100,000

Liabilities = $60,000

We can rearrange the accounting equation to solve for equity:

Equity = Assets - Liabilities

Equity = $225,000 - $60,000

Equity = $165,000

Now, let's calculate the closing equity, which is the opening equity plus the income minus expenses:

Closing Equity = Opening Equity + Income - Expenses

Given:

Opening Equity = $100,000

Income = $145,000

Let's solve for expenses:

Expenses = Opening Equity + Income - Closing Equity

Expenses = $100,000 + $145,000 - $165,000

Expenses = $80,000

So, the correct answer is a. $80,000