Question

At 12/31 accounting records of Gordon Inc contain

AP $2500, Building $31250, Land $30,000, Notes Payable $ ?, Retained earnings
$125,000, AR $18750, Cash ?, Equipment $40,000, Captial Stock $12500
If the cash balance at 12/31 is $67,500 The notes payable balance is

Answer 1

To find the Notes Payable balance, we need to use the accounting equation:

Assets = Liabilities + Equity

We are given the following information:

AP = $2,500

Building = $31,250

Land = $30,000

Notes Payable = ?

Retained Earnings = $125,000

AR = $18,750

Cash = $67,500

Equipment = $40,000

Capital Stock = $12,500

We can add up the assets to get:

Assets = AP + Building + Land + AR + Cash + Equipment

= $2,500 + $31,250 + $30,000 + $18,750 + $67,500 + $40,000

= $190,000

We can rearrange the accounting equation to solve for liabilities:

Liabilities = Assets - Equity

Plugging in the values we have:

Liabilities = $190,000 - ($125,000 + $12,500)

= $190,000 - $137,500

= $52,500

Therefore, the Notes Payable balance is:

Notes Payable = Liabilities - AP

= $52,500 - $2,500

= $50,000