Harbor City Corporation's end-of-year balance sheet consisted of the following amounts: ? $\begin{array} { l r l r } \text { Cash } & \$ 15,000 & \text { Accounts receivable } & \$ 50,000 \\\text { Property, plant, and equipment } & 70,000 & \text { Long-term debt } & 40,000 \\\text { Capital stock } & 100,000 & \text { Accounts payable } & 20,000 \\\text { Retained earnings } & ? & \text { Inventory } & 35,000\end{array}$ ?
What is Harbor City's retained earnings balance at the end of the current year?

Question

Harbor City Corporation's end-of-year balance sheet consisted of the following amounts: ?

\begin{array} { l r l r } \text { Cash } & \$ 15,000 & \text { Accounts receivable } & \$ 50,000 \\\text { Property, plant, and equipment } & 70,000 & \text { Long-term debt } & 40,000 \\\text { Capital stock } & 100,000 & \text { Accounts payable } & 20,000 \\\text { Retained earnings } & ? & \text { Inventory } & 35,000\end{array}

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What is Harbor City's retained earnings balance at the end of the current year?

Quizplus · Accepted Answer

To find the retained earnings, we need to ensure the accounting equation (Assets = Liabilities + Shareholders' Equity) balances. Adding up the assets gives us $15,000 (Cash) + $50,000 (Accounts Receivable) + $70,000 (Property, Plant, and Equipment) + $35,000 (Inventory) = $170,000. The liabilities are $40,000 (Long-term Debt) + $20,000 (Accounts Payable) = $60,000. Given that the Capital Stock is $100,000, to make the equation balance, the Retained Earnings must be $170,000 (Total Assets) - $60,000 (Total Liabilities) - $100,000 (Capital Stock) = $10,000.

Harbor City Corporation's End-Of-Year Balance Sheet Consisted of the Following