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Sole Proprietorships (Appendix)
On May 1, Chong Yu deposited $120,000 of his own savings in a separate bank account to start a printing business. He purchased copy machines for $42,000. Expenses for the year, including depreciation on the copy machines, were $84,000. Sales for the year, all in cash, were $108,000. Chong withdrew $12,000 during the year.
Required:
1. What is the balance in Chong's capital account at the end of the year?
2. Explain why the balance in Chong's capital account is different from the amount of cash on hand.
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