Question

During the first year, Fox Supply has total assets of 15,000 and liabilities of 10,875. During the second year, assets increase by 1,375, and stockholders' equity increases by 950. How much is total liabilities at year-end?

Answer 1

Using the accounting equation, we calculated the total liabilities for Fox Supply at the end of the second year to be $4,550, after accounting for the increase in assets and stockholders' equity.

Step-by-step explanation:

To calculate the total liabilities at year-end for Fox Supply, we can use the accounting equation which states that Assets = Liabilities + Stockholders' Equity. At the beginning of the second year, Fox Supply has assets of $15,000 and liabilities of $10,875. During the second year, assets increase by $1,375 and stockholders' equity increases by $950.

Therefore, at the end of the second year, total assets are $15,000 + $1,375 = $16,375. Applying the accounting equation: $16,375 (Assets) = Liabilities + $10,875 (beginning liabilities) + $950 (increase in equity). To find the new total for liabilities, we rearrange the equation to: Liabilities = $16,375 - ($10,875 + $950). After doing the math: Liabilities = $16,375 - $11,825 = $4,550. Thus, the total liabilities at the end of the second year are $4,550.