Use the following information to answer questions
The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $50,000;Liabilities = ?;Common Stock = $15,000;Revenue = $22,000;Dividends = $1,500;Beginning Retained Earnings = $3,500;Ending Retained Earnings = $7,500.
-The amount of liabilities reported on the end-of-period balance sheet was
A)$27,500.
B)$31,500.
C)$35,000.
D)$42,500.

Question

Use the following information to answer questions 
The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $50,000;Liabilities = ?;Common Stock = $15,000;Revenue = $22,000;Dividends = $1,500;Beginning Retained Earnings = $3,500;Ending Retained Earnings = $7,500.
-The amount of liabilities reported on the end-of-period balance sheet was
A)$27,500.
B)$31,500.
C)$35,000.
D)$42,500.

Quizplus · Accepted Answer

The accounting equation is Assets = Liabilities + Owner's Equity. Rearranging the equation to solve for Liabilities, we get Liabilities = Assets - Owner's Equity. Owner's Equity is the sum of Common Stock and Retained Earnings. Therefore, Liabilities = Assets - (Common Stock + Retained Earnings). Plugging in the given amounts, we get Liabilities = $50,000 - ($15,000 + $7,500) = $27,500.

Use the Following Information to Answer Questions