Problem
Lone Psychic Experience is a sole proprietorship established this year. Alice Lone established the firm with capital of $66,800. During the year she withdrew $22,000 as personal salary. Net income before tax for the year is $62,800. Alice's average tax rate for income tax purposes is 25%.
a) What is the balance of the equity account in the year end financial statements?
b) What is the balance of the equity account at the beginning of the first year?
c) What is the maximum amount Alice can withdraw during the first year of operations?