The following information was extracted from the accounting records of Ernest Company: $$\begin{array} { l r }
\text { Beginning Paid-In Capital } & \$ 90,000 \
\text { Beginning Retained Earnings } & \$ 210,000 \
\text { Beginning Assets } & \$ 455,000
\end{array}$$ During the period assets increased by $150,000, revenues were $200,000, and expenses were $165,000.The owners made no additional investments. The amount of Ernest Company's liabilities at the beginning of the period is _____.
A)$545,000
B)$155,000
C)$300,000
D)$245,000

Question

The following information was extracted from the accounting records of Ernest Company: $$\begin{array} { l r } 
\text { Beginning Paid-In Capital } & \$ 90,000 \
\text { Beginning Retained Earnings } & \$ 210,000 \
\text { Beginning Assets } & \$ 455,000
\end{array}$$ During the period assets increased by $150,000, revenues were $200,000, and expenses were $165,000.The owners made no additional investments. The amount of Ernest Company's liabilities at the beginning of the period is _____.
A)$545,000
B)$155,000
C)$300,000
D)$245,000

Quizplus · Accepted Answer

The accounting equation is Assets = Liabilities + Equity. At the beginning, Equity = Paid-In Capital + Retained Earnings = $90,000 + $210,000 = $300,000. Given Beginning Assets = $455,000, we find Beginning Liabilities = Assets - Equity = $455,000 - $300,000 = $155,000.

The Following Information Was Extracted from the Accounting Records of Ernest