Final answer:
By applying the accounting equation (Assets = Liabilities + Equity) and using the given financial elements, the liabilities for Calloway Company were calculated to be $23,200. The total equity was determined by adding Common Stock and the final Retained Earnings, and then liabilities were determined by subtracting this total equity from the total assets.
Step-by-step explanation:
To calculate the liabilities for Calloway Company, we need to understand and apply the basic accounting equation, which is Assets = Liabilities + Equity. Equity is composed of Common Stock and Retained Earnings. The Retained Earnings for the period can be calculated by taking the Beginning Retained Earnings, adding Net Income, and subtracting Dividends paid out.
First, determine the Net Income for the year: Revenue - Expenses = Net Income. However, we are not given explicit expenses but can calculate the change in Retained Earnings: Ending Retained Earnings - Beginning Retained Earnings + Dividends = Net Income. Therefore, $8,900 - $4,700 + $1,700 = Net Income, so Net Income = $5,900.
Next, combine Common Stock and the calculated Retained Earnings to find total Equity: $6,900 + $8,900 = $15,800 in total Equity. Now we can find the missing liabilities in the accounting equation: $39,000 total Assets = Liabilities + $15,800 Equity. So Liabilities = $39,000 - $15,800 = $23,200.