Question

At year-end 2016, total assets for Arrington Inc. were $1 million and accounts payable were $410,000. Sales, which in 2016 were $2.7 million, are expected to increase by 30% in 2017. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to $470,000 in 2016, and retained earnings were $340,000. Arrington plans to sell new common stock in the amount of $60,000. The firm's profit margin on sales is 3%; 40% of earnings will be retained. What were Arrington's total liabilities in 2016?

Answer 1

$190,000

Step-by-step explanation:

Given that,

Total assets for Arrington Inc. = $1,000,000

Common Stock = $470,000

Retained earnings = $340,000

Total Liabilities = Total Assets - Common Stock - Retained earnings

= $1,000,000 - $470,000 - $340,000

= $190,000

Therefore, Arrington's total liabilities in 2016 is $190,000.