Question

The Baldwin Company currently has the following balances on their balance sheet: Total Liabilities                      \$80,947 Common...

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

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.