Question

Spin Co. has $52,000 in its Cash account, $20,000 in its Inventory account, and $12,000 in its Notes Payable (short-term) account. If Spin's only other account is Common Stock, what is the balance of that account?

A) $20,000.
B) $84,000.
C) $60,000.
D) $44,000.

Answer 1

To determine the balance of Spin Co.'s Common Stock account, we use the accounting equation (Assets = Liabilities + Owner's Equity), which gives us a Common Stock balance of $60,000 after calculations.

Step-by-step explanation:

To find the balance of the Common Stock account for Spin Co., we need to apply the basic accounting equation:

Assets = Liabilities + Owner's Equity

In this scenario, the company's assets and liabilities are given:

• Assets: Cash ($52,000) + Inventory ($20,000) = $72,000
• Liabilities: Notes Payable (short-term) = $12,000

Spin Co.'s total equity would then be the difference between total assets and total liabilities:

Equity = Assets - Liabilities

Equity = $72,000 - $12,000 = $60,000

Given that the only other account is Common Stock, the balance of the Common Stock account must be $60,000. Thus, the correct answer is C) $60,000.