At the beginning of the period, assets were $490,000 and stockholders' equity was $240,000. During the year, assets increased by $60,000, liabilities increased by $40,000, and stockholders' equity increased by $20,000. Beginning liabilities must have been:

Question

Quizplus · Accepted Answer

Using the accounting equation, we know that Assets = Liabilities + Stockholders' Equity. 
At the beginning of the period, 
Assets = $490,000 
Stockholders' Equity = $240,000 
Therefore, Liabilities = Assets - Stockholders' Equity = $490,000 - $240,000 = $250,000.

During the year, 
Assets increased by $60,000, 
Liabilities increased by $40,000, and 
Stockholders' Equity increased by $20,000.

Using the accounting equation, we can again verify this as: 
Assets = $490,000 + $60,000 = $550,000 
Liabilities = $250,000 + $40,000 = $290,000 
Stockholders' Equity = $240,000 + $20,000 = $260,000

Therefore, the beginning liabilities must be equal to $250,000.

At the Beginning of the Period, Assets Were $490,000 and Stockholders