[Patsfan_1284]

So here is the question: Rice Co. was incorporated on January 1, 20X1, with $500,000 from the issuance of stock and borrowed funds of $75,000. During the first year of operations, net income was $25,000. On December 15, 20X1, Rice paid a $2,000 cash dividend. No additional activities affected owner’s equity in 20X1. On December 31, 20X1, Rice’s liabilities had increased to $94,000. In Rice’s December 31, 20X1, balance sheet (statement of financial position), total assets should be reported at:

The Answer is 617K. My question is, why is the 75K not factored in? In my mind the answer should be 692,000. Can someone explain why it’s 617? Thanks in advance.

Reg - Passed
Aud - Passed
Bec - Passed
Far - Passed
Ethics - 95!!! Paper work getting submitted first thing on Monday!

The CPA exam is a test of wills, never quit and never doubt yourself.

[marqzho]

Asset = Liability + equity

It told you liability = $94000
It told you equity = $500000 -2000 +25000 = $523,000 and it told you”No additional activities affected owner's equity

So, total asset = $523000+94000 = $617000

REG 90
FAR 95
AUD 98
BEC 84

[Patsfan_1284]

I have read that question about 20 times and honestly it wasn't until you posted that I saw the “increased to” part of the question. I was reading it as increased 94, so liabilities were 94 + 75. Seriously thank you so much!!

Reg - Passed
Aud - Passed
Bec - Passed
Far - Passed
Ethics - 95!!! Paper work getting submitted first thing on Monday!

The CPA exam is a test of wills, never quit and never doubt yourself.

[Author]

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