Questions: On January 1, Lumia Company's liabilities are 60,000 and its equity is 40,000. On January 3, Lumia purchases and installs solar panel assets costing 10,000. For the panels, Lumia pays 4,000 cash and promises to pay the remaining 6,000 in six months. What is the total of Lumia's assets after the solar panel purchase?

Solution Steps

To find the total of Lumia's assets after the solar panel purchase, we need to consider the initial assets and the changes due to the purchase. Initially, the assets are the sum of liabilities and equity. When Lumia purchases the solar panels, the assets increase by the cost of the panels. However, since part of the payment is made in cash, the cash asset decreases by that amount. The remaining amount is added to liabilities as a payable.

The initial assets of Lumia Company can be calculated using the accounting equation: \[ \text{Assets} = \text{Liabilities} + \text{Equity} \] Given that the liabilities are \(\$60,000\) and the equity is \(\$40,000\), the initial assets are: \[ \text{Initial Assets} = 60,000 + 40,000 = 100,000 \]

Lumia purchases solar panel assets costing \(\$10,000\). This increases the assets by \(\$10,000\). However, since \(\$4,000\) is paid in cash, the cash asset decreases by \(\$4,000\).

The new total assets after the purchase can be calculated by adding the cost of the solar panels and subtracting the cash payment from the initial assets: \[ \text{New Assets} = \text{Initial Assets} + \text{Solar Panel Cost} - \text{Cash Payment} \] Substituting the values: \[ \text{New Assets} = 100,000 + 10,000 - 4,000 = 106,000 \]

Final Answer