Question

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

Total liabilities : $72,303

Common Stock : $11,775

Retained Earnings $88,558

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?

A. $194,136

B.$224,136

C.$172,636

D.$100,333

Answer 1

Total assets next year = $194,136

so correct option is A. $194,136

Step-by-step explanation:

given data

Total liabilities = $72,303

Common Stock = $11,775

Retained Earnings = $88,558

net profit = $36,500

dividends = $15,000

to find out

total assets be next year

solution

we get here Assets for current year that is express as

Assets for current year = Total liabilities + Common stock + Retained earnings ......................1

put here value we get

Assets for current year = $72,303 + $11,775 + $88,558

Assets for current year = $172,636

and

now we get Net addition to assets next year that is

Net addition to assets next year = Net Profit – Dividends ...............2

put here value

Net addition to assets = $36,500 - $15,000

Net addition to assets = $21,500

so as that Total assets next year will be

Total assets next year = Opening assets + Net addition ............3

Total assets next year = $172,636 + $21,500

Total assets next year = $194,136

so correct option is A. $194,136