The financial statements of Calloway Company prepared at the end of the current year 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. What was the amount of total liabilities reported on the balance sheet as of the end of the current year?
A)$27,500
B)$31,500
C)$35,000
D)$42,500

Question

Quizplus · Accepted Answer

Total liabilities can be calculated by using the accounting identity:
Assets = Liabilities + Equity
Therefore, Liabilities = Assets - Equity
Liabilities = $50,000 - $15,000 - $7,500 + $3,500
Liabilities = $31,000 - $4,000
Liabilities = $27,000
Therefore, the amount of total liabilities reported on the balance sheet as of the end of the current year is $27,000, which is closest to option A of $27,500.

The Financial Statements of Calloway Company Prepared at the End