Question

The Baldwin Company currently has the following balances on their balance sheet:

Total Liabilities                      $80,947
Common Stock                     $8,708
Retained Earnings               $100,709

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

$211,864
	$109,417
	$190,364
	$241,864

Answer 1

Given about Baldwin Company,

Last year balance sheet says,

Total liabilities = $80947

Common stock = $8708

Retained earnings = $100709

Next year,

Net income = $36500

Dividend paid = $1500

So, addition to retained earnings = Net income - Dividend = 36500 - 15000 = $21500

So, net retained earning next year = last year retained earning + addition to retained earning

=> Next year retained earning = 100709+21500 = $122209

Since Liabilities and common stock did not changes, total asset next year is

Total asset = Total Liabilities + Common stock + Next year retained earning

=> Total assets = 80947 + 8708 + 122209 = $211864

So, option A is correct.