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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

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Answer #1

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

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