Question

Nash's Trading Post, LLC has assets of $4200000, common stock of $1000000, and retained earnings of $600000. What are the creditors’ claims on their assets?

Answer 1

Answer:

The correct answer is $2,600,000.

Explanation:

According to the scenario, the given data are as follows:

Total Assets = $4,200,000

Common stock = $1,000,000

Retained earnings =  $600,000

So, we can calculate the creditors' claims on their assets by using following formula:

Creditor's Claim on their Assets = Total Assets - ( Common stock + Retained earnings)

= $4,200,000 - ( $1,000,000 + $600,000 )

= $4,200,000 - $1,600,000

= $2,600,000

Hence, Creditors' claims on their assets will be $2,600,000.