Question

The following financial statement information is from five separate companies.

Company Company Company Company Company

A B C D E

December 31, 2016

Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(55,000 \)34,000 \(24,000 \)60,000 $119,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 24,500 21,500 9,000 40,000 ?

December 31, 2017

Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,000 40,000 ? 85,000 113,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . ? 26,500 29,000 24,000 70,000

During year 2017

Stock issuances . . . . . . . . . . . . . . . . . . . . 6,000 1,400 9,750 ? 6,500

Net income (loss) . . . . . . . . . . . . . . . . . . . 8,500 ? 8,000 14,000 20,000

Cash dividends . . . . . . . . . . . . . . . . . . . . . 3,500 2,000 5,875 0 11,000

Required

5. Compute the amount of liabilities for Company E on December 31, 2016.

Short answer

The liabilities of 2016 will be$92,000

Step-by-step solution

Step-by-Step SolutionStep 1 Calculation of equity for 2017

$$\begin{gathered} \mathbf{Equity}\mathbf{=}\mathbf{Assets}\mathbf{-}\mathbf{Liabilities} \\ \mathbf{=}\mathbf{113}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{70}\mathbf{,}\mathbf{000} \\ \mathbf{=}\mathbf{\$}\mathbf{43}\mathbf{,}\mathbf{000} \end{gathered}$$

Calculation of equity for 2016

$$\begin{gathered} \mathbf{Equity}\mathbf{=}\mathbf{Newequity}\mathbf{-}\mathbf{NewIssue}\mathbf{-}\mathbf{NetIncome}\mathbf{+}\mathbf{Cashdividend} \\ \mathbf{=}\mathbf{43}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{6}\mathbf{,}\mathbf{500}\mathbf{-}\mathbf{20}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{11}\mathbf{,}\mathbf{000} \\ \mathbf{=}\mathbf{\$}\mathbf{27}\mathbf{,}\mathbf{500} \end{gathered}$$

Calculation of liabilities of 2016

$$\begin{gathered} \mathbf{Liabilities}\mathbf{=}\mathbf{Assets}\mathbf{-}\mathbf{Equity} \\ \mathbf{=}\mathbf{119}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{27}\mathbf{,}\mathbf{000} \\ \mathbf{=}\mathbf{\$}\mathbf{92}\mathbf{,}\mathbf{000} \end{gathered}$$