Question

At the beginning of April, Warren Corporation's assets totaled $257,000 and liabilities totaled $77,000. During April the following summarized transactions occurred: Additional shares of stock were sold for $28,500 cash. A building costing $112,000 was purchased using $18,500 cash and by signing an $93,500 long-term note payable. Short-term investments costing $10,700 were purchased using cash. $11,700 was paid to an employee as a loan; the employee signed a six-month note in exchange for the loan. How much are Warren's total liabilities at the end of April

Answer 1

Answer:

Total liabilities is $170,500

Explanation:

Warren's total liabilities at end of April comprises of the beginning  balance of liabilities of $77,000 plus the notes payable signed in  respect of the building acquired in the course of the year,the computation is shown below:

Beginning balance of liabilities         $77,000

Notes payable                                    $93,500

Total liabilities                                     $170,500

The notes signed by employee of $11,700 is notes receivable as the employee is owing the company and should be classified as notes payable ,but notes receivable instead, an asset.