Question

Midyear on July 31st, the Digby Corporation's balance sheet reported: Total Assets of $205.498 million Total Common Stock of $6.350 million Cash of $10.050 million Retained Earnings of $44.117 million. What were the Digby Corporation's total liabilities?
a) $165.081 million.
b) $144.981 million.
c) $155.031 million.
d) $161.381 million.

Answer 1

Answer:

The value of total liabilities is $155.031 million and option c is the correct answer.

Explanation:

The basic accounting equation states that the total value of assets is always equal to the sum of the total value of liabilities and the total value of equity.

Thus, we can say that,

Total Assets = Total Liabilities + Total Equity

The equity part can contain various components. In the given question it has two components namely Common Stock and retained earnings.

205.498 = Total Liabilities + (6.350 + 44.117)

205.498 = Total Liabilities + 50.467

205.498 -  50.467 = Total Liabilities

Total Liabilities = $155.031