Question

Michael Company reports the following account balances at the end of the first year of​ operations: Revenues $ 160 comma 000 Cost of Goods Sold $ 46 comma 000 Salaries Expense $ 21 comma 000 Dividends Declared and Paid ​$12,000 Utilities Expense $ 11 comma 000 Advertising Expense ​$10,000 ​Short-term Investments $ 14 comma 000 Cash $ 102 comma 000 Land $ 40 comma 000 Common Stock ​$50,000
What are total liabilities at the end of the first​ year?

Answer 1

Answer:

$46,000

Explanation:

The computation of the total liabilities at the end of the first​ year is shown below:

We know that

Total assets = Total liabilities + stockholder equity

where,

Total assets = Cash + land + short term investment

                    = $102,000 + $40,000 + $14,000

                    = $156,000

Stockholder equity = Common stock + net income - dividend paid

                                = $50,000 + 72,000 - $12,000

                                = $110,000

So, the total liabilities would be

= $156,000 - $110,000

= $46,000

Working Note:

The net income is

= Revenue - cost of goods sold - Salaries Expense -  Utilities Expense - Advertising Expense ​

= $160,000 - $46,000 - $21,000 - $11,000 - $10,000

= $72,000