Question

K2 corporation has assets of $2,400,000, common stock of $624,000, and retained earnings of $380,000. what are the creditors' claims on their assets?

Answer 1

Given:
Assets = $2,400,000
Common stock = $624,000
Retained earnings = $380,000
To calculate: Creditors' claim on assets
Solution:
Claim on assets = This includes liabilities and owners' equity.
Creditors' claim on assets = Assets-Liabilities
Liabilities in this case is common stock($624,000)and retained earnings($380,000).
Now, putting values in the formula,
Creditor's claim on assets = $2,400,000 - $624,000 - $380,000 = $1,396,000
So, creditors' claim on assets of K2 corporation = $1,396,000