Question

Diane Corporation is preparing its year-end balance sheet. The company records show the following selected amounts at the end of the year:
Total asset $530, 000
Total noncurrent assets 362, 000
Liabilities:
Notes payable (8\%, due in 5 years) 15, 000
Accounts payable 56, 000
Income taxes payable 14, 000
Liability for withholding taxes 3,000
Rent revenue collected in advance 7,000
Bonds payable (due in 15 years) 90, 000
Wages payable 7, 000
Property taxes payable 3, 000
Note payable (10\%, due in }6\text{ months) 12, 000
Interest payable 400
Common stock 100, 000
(b) Would your computation be different if the company reported $ 250,000 worth of contingent liabilities in the notes to its financial statements? Explain.

Answer 1

No, it will not be affected as contingent liabilities are yet not recognized.

Assets are owned by the company and liabilities are borne by the company. Both are listed on the company's balance sheet, which is a financial statement that shows the financial condition of the company. Assets fewer liabilities equal the owner's equity or net worth.

Debt mainly has three classifications. These are short-term liabilities, long-term liabilities, and contingent liabilities. Short-term and long-term liabilities are the most common in business. As with businesses, the net worth of an individual or household is determined by weighing assets and liabilities for most households, liabilities.

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