Davis Computer Company has total liabilities of $50 000, total assets of $280 000 and paid-up capital of $120 000. What is the amount of retained earnings and/or reserves?
A) $20 000
B) $110 000
C) $140 000
D) $160 000

Question

Quizplus · Accepted Answer

The amount of retained earnings and/or reserves can be calculated using the accounting equation: Assets = Liabilities + Shareholders' Equity. Shareholders' Equity includes paid-up capital and retained earnings. Given that total assets are $280,000 and total liabilities are $50,000, Shareholders' Equity is $280,000 - $50,000 = $230,000. Subtracting the paid-up capital of $120,000 from the total Shareholders' Equity gives us the retained earnings: $230,000 - $120,000 = $110,000.

Davis Computer Company Has Total Liabilities of $50 000, Total