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14 May, 15:14

The Baldwin company currently has the following balances on their balance sheet: Assets $244,260 Common Stock $54,527 Retained earnings $46,136 Suppose next year the Baldwin Company generates $20,000 in net profit, pays $10,000 in dividends, assets change to $151,000, and common stock remains unchanged. What must their total liabilities be next year?

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  1. 14 May, 15:19
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    The aggregate liabilities amounts to $40,337 for the next year

    Explanation:

    In order to compute the total liabilities, using the formula as:

    Assets = Liabilities + Shareholders equity

    where

    Shareholders equity = Contributed Capital + Retained Earnings

    Retained Earnings = Old Retained Earnings + Net Income - Dividends

    Liabilities = Assets - Common stock - Retained Earnings

    = $151,000 - $54,527 - $46,136 - ($20,000 - $10,000)

    = $151,000 - $54,527 - $46,136 - $10,000

    = $40,337
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