Question

Andrews Company currently has the following balances in their liability and equity accounts:

Total Liabilities: $382,903,721
Common Stock: $14,208,000
Retained Earnings: -$164,212,681

Suppose next year the Andrews Company generates $36,500,000 in Net Profit, pays $15,000,000 in dividends, and total liabilities and common stock remain unchanged. What must their total assets be next year?

$254,399,040

-$164,212,681

$284,399,040

$232,899,040

Answer 1

Answer:

Current Year:

Current Year Total Liabilities = $382,903,721
Current Year Common Stock = $14,208,000
Current Year Retained Earnings = -$164,212,681

Next Year:

Next Year Total Liabilities = $382,903,721
Next Year Common Stock = $14,208,000
Next Year Retained Earnings = -$164,212,681 + $36,500,000 - $15,000,000
Next Year Retained Earnings = -$142,712,681

Total Assets = Total Liabilities + Total Stockholders’ Equity
Total Stockholders’ Equity = Common Stock + Retained Earnings
Total Stockholders’ Equity = $14,208,000 + (-$142,712,681)
Total Stockholders’ Equity = -$128,504,681

Total Assets = $382,903,721 + (-$128,504,681)
Total Assets = $254,399,040