Question

Watson​ Foods, Inc. reported the following transactions for September 2019.

​a)	The business received $ 23 comma 000$23,000 cash and issued common stock. It was credited to Common Stock.
​b)	The business purchased office equipment for $ 9 comma 000$9,000 for which $ 1 comma 500$1,500 cash was paid and the balance was put on a note payable.
​c)	Paid insurance expense of $ 1 comma 300$1,300 cash.
​d)	Paid the September utility bill for $ 900$900 cash.
​e)	Paid $ 1 comma 500$1,500 cash for September rent.
​f)	The business had sales of $ 10 comma 000$10,000 in September. Of these​ sales, 4040​% were cash​ sales, and the balance was credit sales.
​g)	The business paid $ 6 comma 000$6,000 cash for office furniture.

What are the total liabilities at the end of​ September, 2019?

Answer 1

Calculation of Total Liabilities is Shown as Follows :-

Note Payable at the time of purchase = Office Equipment Cost - Cash Paid

= $9,000 - $1,500 = $7,500

Note payable paid = $6,000

Note Payable Ending Balance = $7,500 - $6,000 = $1,500

Therefore total liabilities include only note payable for $1,500.

Hence total liabilities at the end of September 2019 is $1,500.

Working Notes:

1) Net Income = Sales - Insurance Expense - Rent Expense - Utility Expense

= $10,000 - $1,300 - $1,500 - $900 = $6,300

2) Credit Sales = 40% of Sales = 10,000*40% = $4,000

Therefore Accounts Receivable Balance is $4,000 at the end of September 2019