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View Full Version : What is the equation for finding liabilites for a corporation


thara williams
Jan 3, 2010, 05:58 PM
I need to find the missing number for this financial statement:

Total assets $325,000
Total liabilities ?
Paid in capital $40,000
Retained earnings ?
Net income $113,000
Dividends declared and paid during 2009 $65,000
Retained earnings at the beginning of 01/01/09 $42,000

How to calculate the missing amounts?

morgaine300
Jan 4, 2010, 09:36 PM
You need to deal with two things here. One, the accounting equation:
Assets = Liabilities + Equity
KNOW THIS EQUATION

Extended out, it's also assets = liabilities + paid in capital + retained earnings. (That is, I just divided equity between the paid in capital and retained earnings.)

Also, you need to know what affects retained earnings:
beginning balance
+ net income
-dividends declared
= ending balance

Plug in everything given in the problem and work towards the missing numbers. Give it a try, and post your results if you want them checked.