Using the given balance sheet, what is the total equity?

Using the given balance sheet, what is the total equity?

• A. $450,000
• B. $400,000
• C. $500,000
• D. $350,000

Answer: (A)

Equity represents the owners' residual claim after liabilities are paid. On a balance sheet, assets must equal liabilities plus equity, so equity equals assets minus liabilities. To find total equity, identify the totals for assets and for liabilities, then subtract liabilities from assets. In this balance sheet, that subtraction comes out to 450,000, so the total equity is 450,000.

Equity represents the owners' residual claim after liabilities are paid. On a balance sheet, assets must equal liabilities plus equity, so equity equals assets minus liabilities. To find total equity, identify the totals for assets and for liabilities, then subtract liabilities from assets. In this balance sheet, that subtraction comes out to 450,000, so the total equity is 450,000.