At the beginning of the year, Al Ain Company had total assets of $1,300,000 and total liabilities of $525,000.

Required:

Answer the following questions viewing each situation as being an independent situation.

a. If total assets increased $700,000 during the year, and total liabilities decreased $187,500, what is the amount of owner's equity at the end of the year?

b. If total assets decreased $120,000 and owner's equity increased $325,000 during the year, what is the amount of total liabilities at the end of the year?