Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)1) Acquired $4,800 cash from issuing common stock.2) Borrowed $3,100 from a bank.3) Earned $4,000 of revenues.4) Incurred $2,580 in expenses.5) Paid dividends of $580.Lexington Company engaged in the following transactions during Year 2:1) Acquired an additional $1,400 cash from the issue of common stock.2) Repaid $1,930 of its debt to the bank.3) Earned revenues, $5,400.4) Incurred expenses of $3,110.5) Paid dividends of $1,720. Total liabilities on Lexington's balance sheet at the end of Year 1 equal:
A) $1,400.
B) $1,140.
C) $3,100.
D) ($1,930).

Question

Quizplus · Accepted Answer

Total liabilities at the end of Year 1 can be calculated as follows: 
Beginning balance of liabilities = $3,100 (from transaction 2)
Add any new liabilities incurred during Year 1 = $0 (there are no transactions indicating any new liabilities)
Subtract any liabilities repaid during Year 1 = $0 (there are no transactions indicating any liabilities repaid)
Therefore, total liabilities at the end of Year 1 are $3,100.

Lexington Company Engaged in the Following Transactions During Year 1