Question

7) Michael Company reports the following account balances at the end of the first year of operations: $130,000 $47,000 $%20,000 12,000 $18,000 10,000 $15,000 $107,000 $45,000 50,000 evenues ther Expenses alaries Expense ividends Utilities Expense dvertising Expense uildin ash and ommon Stock What are total liabilities at the end of the first vear? A) $167,000 B) $90,000 C) $94,000 D) $50,000

Answer 1

Answer

• Correct Answer is Option ‘C’ $ 94,000
• Working:
  We know that Assets = Liabilities + Equity
  Hence, Assets – Equity = Liabilities.

	Assets:
	Building	$15,000
	Cash	$107,000
	Land	$45,000
A	Total Assets		$167,000
	Equity:
	Common Stock	$50,000
	Retained earnings/Net Income--
	Revenues	$130,000
	Other expenses	($47,000)
	Salaries expense	($20,000)
	Dividends	($12,000)
	Utilities expense	($18,000)
	Advertising expense	($10,000)
B	Total Equity		$73,000
C = A - B	Total Liabilities		$94,000 = Answer