Is this the expanded accounting equation?

Assets = liabilities + owner's equity + revenue - expenses

If so, where does retained equity fall under?

This is what I did. We have to find the balnk spot.

20, 000 (assets) = 8,000 (liabilities) + X (capital stock) + 3,500 (retained earnings)

20,000 = 8,000 + 8,500 + 3,500

X = 8,500

Is this right?

If you have:
Assets 20,000
Liabilities 8,000
Retained Earnings of 3,500

Then you are correct, Capital Stock must be 8,500

Yes the answer is 8,500

The thread is almost three years old. Not to mention that you're answering what has already been answered.