1.

Sal’s Silly songs has $23,000 total assets

Greg’s Tunes:
Total assets = total liabilities + owner contribution + net income
= 10,000 + 6,000 + 9,000 = $25,000
 Greg’s Tunes has more assets
2.
Grey’s Tunes owes $10,000 to creditors
Sal’s Silly Songs:
Total creditors = total assets – (owner contribution + revenues – expenses)
(Liabilities)
= 23,000 – (8,000 + 35,000 – 22,000) = $2000
 Grey’s Tunes owes more to the creditors
 Grey’s Tunes owes more to the creditors
3.
Sal’s Silly: owner’s equity = owner contribution + net income = owner
contribution + revenues – expenses
= 8,000 + 35,000 - 22,000 = $21,000
Grey’s Tunes: owner’s equity = owner contribution + net income = 6,000 +
9,000 = $15,000
 Sal’s Silly has more owner’s equity at the end of the year.
 Sal’s Silly has more owner’s equity at the end of the year.
4.
Sal’s Silly: revenues = $35,000
Grey’s Tune: revenues = net income + expenses = 9,000 + 44,000 = $53,000
 Grey’s Tune brought in more revenues
5.
Sal’s Silly: net income = revenues – expenses = 35,000 – 22,000 = $13,000
Grey’s Tune: net income = $9,000
 Sal’s Silly is more profitable
 Sal’s Silly is more profitable
6. I think the most important question for evaluating these two businesses is
“which business has more owner’s equity at the end of the year?”. Because
which business has more equity synonymous with has more profits to keep
operating the business.
7. From a financial standpoint, Sal’s Silly looks better because:
- It owes less to creditors.
- It has more owner’s equity at the end of the year.
- It is more profitable (has more net income).