Bailey Corporation, prepares the following adjustments required at the end of the month on July 31: Before these adjustments, Bailey had assets of $70,000, Liabilities of $50,000 and Stockholders’ equity of $20,000. Here are the adjustments made: a. Received a $568 utility bill for electricity usage in July to be paid in August. b. Owed wages to 4 employees who worked four days at $103 each per day at the end of July. The company will pay employees at the end of the first week of August. c. On July 1, loaned money to an employee who agreed to repay the loan in one year along with $2,400 for one full year of interest. No interest has been recorded yet. After the adjustments stockholders’ equity on 7/31 will be

After the adjustments stockholders’ equity on 7/31 will be  $20,184.

Explanation:

Journal Entries to Show the adjustments are as follows :

a.

Utility Expenses $568 (debit)

Accounts Payable $568 (credit)

b.

Wages Expense $1,648 (debit)

Wages Payable $1,648 (credit)

c.

Loan Receivable $2,400 (debit)

Interest Income $2,400 (credit)

To Determine Effect on Equity use the Accounting Equation : Assets = Equity + Liability.

Therefore, Equity = Assets - Liability

Effect on Assets = $70,000 + $2,400                    =  $72,400

Effect on Liabilities = $50,000 + $568 + $1,648   =  ($52,216)

Effect on Equity (Total)                                            =   $20,184

Conclusion :

Therefore, After the adjustments stockholders’ equity on 7/31 will be  $20,184.

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