Packard Company engaged in the following transactions during Year 1, its first year of operations: (Assume all transactions are cash transactions.) 1)Acquired $1,050 cash from the issue of common stock.2)Borrowed $520 from a bank.3)Earned $750 of revenues.4)Paid expenses of $270.5)Paid a $70 dividend.
During Year 2, Packard engaged in the following transactions: (Assume all transactions are cash transactions.)
1)Issued an additional $425 of common stock.2)Repaid $290 of its debt to the bank.3)Earned revenues of $850.4)Incurred expenses of $400.5)Paid dividends of $120.
The amount of total liabilities on Packard's Year 1 balance sheet is
A)$230
B)$400
C)$520
D)$790

Question

Quizplus · Accepted Answer

The total liabilities on the Year 1 balance sheet can be calculated as:
Total assets = Total liabilities + Stockholders' equity

We know that the company acquired $1,050 cash from the issue of common stock and borrowed $520 from a bank in Year 1. Therefore, the total liabilities for Year 1 would be:
Total liabilities = Cash from issue of common stock + Amount borrowed from bank
Total liabilities = $1,050 + $520
Total liabilities = $1,570

Thus, Choice C ($520) is the correct answer.

Packard Company Engaged in the Following Transactions During Year 1