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31 December, 22:40

The Baldwin Company currently has the following balances on their balance sheet:

Total liabilities : $72,303

Common Stock : $11,775

Retained Earnings $88,558

Suppose next year the Baldwin Company generates $36,500 in net profit and pays $15,000 in dividends and total liabilities and common stock remain unchanged. What must their total assets be next year?

A. $194,136

B.$224,136

C.$172,636

D.$100,333

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Answers (1)
  1. 31 December, 22:57
    0
    Total assets next year = $194,136

    so correct option is A. $194,136

    Explanation:

    given data

    Total liabilities = $72,303

    Common Stock = $11,775

    Retained Earnings = $88,558

    net profit = $36,500

    dividends = $15,000

    to find out

    total assets be next year

    solution

    we get here Assets for current year that is express as

    Assets for current year = Total liabilities + Common stock + Retained earnings ... 1

    put here value we get

    Assets for current year = $72,303 + $11,775 + $88,558

    Assets for current year = $172,636

    and

    now we get Net addition to assets next year that is

    Net addition to assets next year = Net Profit - Dividends ... 2

    put here value

    Net addition to assets = $36,500 - $15,000

    Net addition to assets = $21,500

    so as that Total assets next year will be

    Total assets next year = Opening assets + Net addition ... 3

    Total assets next year = $172,636 + $21,500

    Total assets next year = $194,136

    so correct option is A. $194,136
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