Question

The Baldwin Company currently has the following balances on their balance sheet:

Total Liabilities $137,834

Common Stock $49,489

Retained Earnings $35,187

Suppose next year the Baldwin Company generates $36,500 in net profit and pays $15,000 in dividends and total liabilities and common stock remain unchanged. What must their total assets be next year?

Answer 1

As per balance sheet equation,
Assets	=	Liabilities + Stockholder's Equity
So,
Retained Earning- Beginning				$       35,187
Add:Net Profit				$       36,500
Less:Dividend paid				$       15,000
Retained Earning- Ending				$       56,687
Stockholder's Equity-Next Year:
Common Stock				$       49,489
Retained Earning- Ending				$       56,687
Total Stockholder's Equity				$   1,06,176
Liabilities has not chnaged.
So, Liabilities Next Year				$   1,37,834
No, Total Liabilities and Stockholder's Equity			=	$   1,37,834	+	$ 1,06,176	=	$ 2,44,010
Because total laibilities plue Stockholders equity are equal to Total Assets.
So, Total Assets next year		$         2,44,010