Question

a company was formed with $60,000 cash being contributed by its owners in exchange for common stock. The, the company borrowed $30,000 from a bank. Next, the company purchased $10,000 of inventory and paid cash for it. Lastly, the company purchased $70,000 of equipment by paying $10,000 in cash and issuing a note payable (for the remaining $60,000) what is the amount og the total liabilities to be reported on the balance sheet?

A. 0

B. $80,000

C. $90,000

D. $60,000

Answer 1

The amount of the total liabilities to be reported on the balance sheet is calculated as follows:

Assets	$
Current Assets:
Cash
($60,000 +$30,000 - $10,000 - $10,000)	70,000
Inventory	10,000
Property,plant and Equipment:
Equipment	70,000
Total Assets	$150,000
Liability and Stockholder's equity
Liability:
Current Liability	-
Notes Payable	60,000
Bank Loan	30,000
Stockholder's equity:
Common stock	60,000
Total Liability and Stockholder's equity	$150,000

So amount of total liability = Notes Payable + Bank Loan

                                      = $60,000 + $30,000

                                      = $90,000

The amount of the total liabilities to be reported on the balance sheet is $90,000.

So correct answer is option (C) or $90,000