Calculating Bonita Company's Owner's Equity

What is Bonita Company's owner's equity based on the provided information?

Bonita Company's owner's equity must be $3,600. To calculate the owner's equity, we can use the formula: owner's equity = total assets - total liabilities. Given that Bonita Company has total liabilities of $10,800 and total assets of $14,400, we can substitute these values into the formula: owner's equity = $14,400 - $10,800 = $3,600.

Understanding Bonita Company's Owner's Equity Calculation

Bonita Company's owner's equity is a crucial financial metric that indicates the residual value or the amount that would be left for the owner if the company's assets were liquidated to pay off all liabilities. In this case, the owner's equity is calculated by subtracting the total liabilities from the total assets.

The given total liabilities of $10,800 represent the debts and obligations of Bonita Company, while the total assets of $14,400 include all resources owned by the company. By subtracting the total liabilities from the total assets, we arrive at the owner's equity amount of $3,600.

Owner's equity provides insight into the financial health and stability of a company. A higher owner's equity typically indicates a stronger financial position, as it represents the portion of assets not financed by debt. In the case of Bonita Company, the $3,600 owner's equity signifies the amount of the company's assets that belong to the owner after accounting for all liabilities.

Overall, understanding how to calculate owner's equity is essential for assessing a company's financial standing and evaluating its ability to generate long-term value for the owner.