Question

"During January 2018, the first month of operations, a consulting firm had following transactions:

Issued common stock to owners in exchange for $36,000 cash.
Purchased $9,000 of equipment, paying $1,800 cash and signing a promissory note for $7,200.
Received $16,200 in cash for consulting services performed in January.
Purchased $2,700 of supplies on account; all of the supplies were used in January.
Provided consulting services on account in the amount of $28,800.
Paid $1,350 on account.
Paid $5,400 to employees for work performed during January.
Received a bill for utilities for January of $6,100; the bill remains unpaid.

What is the amount to be reported as total liabilities on the balance sheet at the end of January?"

Answer 1

The total liabilities at the end of January would be $16,000.

Step-by-step explanation:

The total liabilities on the balance sheet at the end of January can be calculated by considering the transactions:

• Purchased equipment for $9,000, paying $1,800 cash and signing a promissory note for $7,200. This increases liabilities by $7,200.
• Purchased supplies on account for $2,700. This increases liabilities by $2,700.
• Paid $1,350 on account. This decreases liabilities by $1,350.
• Received a bill for utilities for January of $6,100. This increases liabilities by $6,100.

So the total liabilities at the end of January would be $7,200 + $2,700 + $6,100 = $16,000.