The Baldwin Company currently has the following balances on their balance sheet:
ID: 328503 • Letter: T
Question
The Baldwin Company currently has the following balances on their balance sheet:Total Liabilities $72,526
Common Stock $10,630
Retained Earnings $91,384
Suppose next year the Baldwin Company generates $36,500 in net profit and pays $15,000 in dividends and total liabilities and common stock remain unchanged. What must their total assets be next year? Select: 1 $102,015 $226,040 $174,540 $196,040 The Baldwin Company currently has the following balances on their balance sheet:
Total Liabilities $72,526
Common Stock $10,630
Retained Earnings $91,384
Suppose next year the Baldwin Company generates $36,500 in net profit and pays $15,000 in dividends and total liabilities and common stock remain unchanged. What must their total assets be next year? Select: 1 $102,015 $226,040 $174,540 $196,040
Explanation / Answer
Solution:
As per the accounting equation, Assets is given as;
Total Assets = Liabilities + Equity
Equity comprises of common stock, dividends, and retained earnings. Replacing these values with equity in the above formula, we get;
Total Assets = Liabilities + Common Stock + Retained Earnings + Net profit - Dividends
Putting the given values in the above formula, we get;
Total Assets = $72,526 + $10,630 + $91,384 + $36,500 - $15,000
Total Assets = $196,040
Answer: Option (D) - $196,040
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