Question

# The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets =...

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = \$38,000; Liabilities = ?; Common Stock = \$6,800; Revenue = \$14,600; Dividends = \$1,650; Beginning Retained Earnings = \$4,650; Ending Retained Earnings = \$8,800.

Based on this information, the amount of expenses on Calloway's income statement was

Calculation of expenses:

We know that:

Ending retained earnings = Beginning retained earnings + Net income - Dividends

 Beginning retained earnings \$4,650 Dividends \$1,650 Ending retained eanings \$8,800

These are the available data. Let's apply this to the equation given above:

\$8,800 = \$4,650 + Net income - \$1,650

= \$8,800 = \$3,000 + Net income

Net income = \$8,800 - \$3,000 = \$5,800

Net income = Revenue - Expenses

Revenue = \$14,600 (given in the question)

So, \$5,800(net income) = \$14,600(revenue) - Expenses

Expenses = Revenue - Net income = \$14,600 - \$5,800 = \$8,800

So, expenses = \$8,800

Calculation of Liability:

Assets = liabilities + stockholders' equity

So, liabilities = Assets - stockholders' equity

Assets = \$38,000

Stock holders' equity = common stock + ending retained earnings = \$6,800 + \$8,800 = \$15,600

So, liabilities = \$38,000 - \$15,600 = \$22,400