If total assets of Hercules Manufacturing,Inc.are $556,000,Retained Earnings at December 31,2018,must be:
A)$811,000.
B)$180,000.
C)$221,000.
D)$335,000.

Question

Quizplus · Accepted Answer

Total assets = Liabilities + Shareholders' Equity
Retained Earnings can be found in Shareholders' Equity section.

We don't have information on liabilities or total shareholders' equity, so we cannot calculate Retained Earnings directly. However, we can use the formula to rearrange it as:

Shareholders' Equity = Total Assets - Liabilities

Then, we can estimate the minimum amount of shareholders' equity (and therefore, Retained Earnings) if we assume that liabilities are equal to zero. This is not necessarily accurate, but it gives us a lower bound:

Shareholders' Equity = $556,000 - 0 = $556,000

Retained Earnings is a component of Shareholders' Equity, so it must be less than or equal to $556,000. Therefore, the only possible option is C) $221,000.

If Total Assets of Hercules Manufacturing,Inc