Ramos Inc. has total assets of $1,000 and total liabilities of $450 on December 31, 20Y8. Assume that assets increased by $130 and liabilities decreased by $25 during 20Y9. What would stockholders' equity be as of December 31, 20Y9?
a. $550
b. $705
c. $655
d. $1,295
E. $705

$705

Explanation:

As we know:

Opening Assets = Op. Equity + Op. Liabilities

By putting opening values we have:

$1000 = Op. Equity + $450

This emplies

Op. Equity = $1000 - $450 = $550

Assets are debit in nature and equities and liabilities are credit in nature. And we also know that the debit and credit are in equal amount . This means that the increase in debit for the year is equal to increase in credit for the year.

So this emplies:

Change in Assets = Change in equity + Change in liabilities

$130 = Change in equity + (-$25)

Change in equity = $130 + $25 = $155 change in equity for the year.

Furthermore, the Closing equity will be:

Closing Equity = Op. Equity + Change in Equity for the year

Closing Equity = $550 + $155 = $705

So the right answer is $705.