Question

On June 1 st a hotelâ s balance sheet shows assets of $6,400,000 and ownersâ equity of $2,000,000 what is the amount of the hotelâ s liabilities? $2,200,000 $4,400,000 $3,400,000 $8,400,000

Answer 1

Answer:

$4,400,000

Explanation:

A balance sheet is a statement showing the financial position of a business as at a particular date. At all time the Asset of a business must be equal  Liabilities + Owners' Equity. i.e Assets = Liabilities + Owners' Equity.

In the case of Hotela's balance sheet

Asset= $ 6,400,000

Equity = $2,000,000

Liabilities = ?

Going by the accounting equation Assets = Liabilities + Owners' Equity.  

To calculate liabilities the formula below will be used

Liabilities = Asset - Owners' equity

Therefore Liabilities = $6, 400,000 - $2,000,000  = 4,400,000

Hence the answer is 4,400,000