The balance sheet of the Algonquin Company reported assets of $50,000, liabilities of $22,000 and common stock of $15,000. Based on this information only, what is the amount of retained earnings?
A) $7,000.
B) $57,000.
C) $13,000.
D) $87,000.

Question

Quizplus · Accepted Answer

Since the total assets ($50,000) must equal the sum of liabilities ($22,000), common stock ($15,000) and retained earnings, we can solve for retained earnings:

Retained earnings = Total assets - Liabilities - Common stock
Retained earnings = $50,000 - $22,000 - $15,000
Retained earnings = $13,000

The Balance Sheet of the Algonquin Company Reported Assets of $50,000