Cost Analysis: Understanding Financial Statements and Owner's Equity

What accounting assumption is being applied by Wangyu Electronics?

a. Going concern

b. Reliability

c. Accounting entity

d. Accounting period

If the assets of Jason's business increased by $60,000 and liabilities increased by $20,000, with a profit of $48,000, what additional contribution or withdrawal was made by the owner?

a. Contribution $8,000

b. Drawings $8,000

c. No additional contribution or withdrawal

d. Drawings $12,000

Answer:

Wangyu Electronics is applying the accounting assumption of d. Accounting period. This means they divide their economic activities into three-month timeframes and prepare financial statements at the end of each period.

Detailed Explanation:

Regarding Jason's business, to determine the additional contribution or withdrawal made by the owner, we need to analyze the changes in assets, liabilities, and profit.

Given that the assets increased by $60,000 and liabilities increased by $20,000, and the profit was $48,000, the remaining difference of $40,000 represents the change in the owner's equity, which is equal to the profit for the period. As the profit is positive ($48,000), it indicates an increase in owner's equity.

To calculate the additional contribution or withdrawal, we subtract the profit ($48,000) from the change in owner's equity ($40,000), resulting in a negative value. This negative value signifies a withdrawal made by the owner.

Therefore, the owner made a withdrawal of $12,000 during the current year.