Question

If a business has the following balances, how much is total liabilities?

Assets
Cash $ 5,000
Accounts receivable 2,575
Equipment 14,000
Liabilities
Total liabilities ?
Stockholders' Equity
Common stock and additional paid-in capital $ 700
Retained earnings 1,900

Answer 1

To determine the total liabilities of a business, apply the accounting equation: Assets = Liabilities + Equity. Total assets amount to $21,575 and equity is $2,600. Using the equation, liabilities are calculated to be $18,975.

Step-by-step explanation:

The student's question pertains to calculating the total liabilities of a business given a set of financial balances. To calculate total liabilities, we use the basic accounting equation: Assets = Liabilities + Equity. From the information provided, the total assets are the sum of cash, accounts receivable, and equipment, which equals $5,000 + $2,575 + $14,000 = $21,575. The equity portion is the sum of common stock and additional paid-in capital plus retained earnings, which equals $700 + $1,900 = $2,600.

Plugging these numbers into the accounting equation, we get:

Assets ($21,575) = Liabilities + Equity ($2,600)

To find the total liabilities, we rearrange the equation:

Liabilities = Assets - Equity

Liabilities = $21,575 - $2,600 = $18,975

Therefore, the total liabilities for the business are $18,975.