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A basic financial question regarding revenue

I'm in a basic accounting class and I'm stuck on what is probably a relatively easy question. I'm not necessarily looking for an answer, but just some guidance on whether I'm getting things right. We're asked to solve for "X" in both cases for an imaginary not-for-profit company:

December 31, 2001

Assets: X Liabilities: $55,000 Equity: $45,000

This one is easy, unless my algebra is extremely rusty, X=$100,000

During 2001

Total Revenues: X Total Expenses: $330,000

This one threw me because our text doesn't spell it out in detail. Wouldn't X in this case be $430,000, since revenues-expenses = net income, and net income would go in our assets column at the end of the year?

I may be way off base, but I'm not sure. Btw, this is an online class, so I've sent my instructor the same message, but it could be awhile before I hear from him.

Reply to
Rob L.
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"Rob L." wrote

You're off base. Maybe mot even in the park.

It's not clear if this is a first year or not, so the actual answer may vary greatly.

Net incomes are what adds to what is being called equity. Actually non-profits don't have a true equity, but the theory is the same. Assuming a beginning equity of $0, what would net revenue or net income need to be to make equity $45,000?

Reply to
Paul Thomas, CPA

Are you saying I'm wrong on the first problem as well?

Reply to
Rob L.

First part is correct, assets = liabilities + equity.

Your second part is off the mark.

Think through it.

Reply to
Paul Thomas, CPA

okay, I'm going to give it a shot...

If we are assuming a starting equity of 0, then revenue would need to be $375K to make equity $45K, as in the original problem. I also note that the next problem asks how that would change if the previous year's equity was $30K. Would this be carried over as revenue into

2001, making my total revenue $405K?
Reply to
Rob L.

Yup.

Ummm....nope.

Try $345,000 of revenues, leaving $15,000 of current profit, added to the $30K of retained earnings from prior years.

Reply to
Paul Thomas, CPA

Thanks for the help, Paul. I think I'm getting it now.

Reply to
Rob L.

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