Thirty percent of the total assets of Shanahan Corporation have been financed through borrowing.The total liabilities of the company are $600,000.What is the amount of owners' equity?
A)$ 180,000.
B)$2,000,000.
C)$1,400,000.
D)$2,600,000.

Question

Quizplus · Accepted Answer

Let the total assets of Shanahan Corporation be "A".

According to the question, 30% of A is financed through borrowing. So, the amount of debt is:

Debt = 30% of A
Debt = 0.3A

Also, the total liabilities of the company are given as $600,000. We know that the debt is a part of the liabilities. So,

Debt = Liabilities
0.3A = $600,000
A = $600,000 / 0.3
A = $2,000,000

Now, we can use the accounting equation to find the amount of owners' equity:

Owners' Equity = Assets - Liabilities
Owners' Equity = $2,000,000 - $600,000
Owners' Equity = $1,400,000

Therefore, the amount of owners' equity is $1,400,000. Option C is the correct answer.

Thirty Percent of the Total Assets of Shanahan Corporation Have