Accounting: 1,001 Practice Problems For Dummies
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The balance sheet reports a company's assets, liabilities, and equity as of a specific date. This is different from an income statement, which covers a period of time.

The following example questions ask you to calculate a company's total liabilities and total equity on a given day.

Practice questions

Use the following information to answer the questions. A company reports the following on its balance sheet:

  • Cash: $10,000

  • Accounts receivable: $20,000

  • Inventory: $14,000

  • Prepaid expenses: $3,000

  • Property, plant, and equipment: $35,000

  • Accumulated depreciation: $2,000

  • Accounts payable: $5,000

  • Accrued expenses: $6,000

  • Short-term notes: $7,000

  • Long-term notes: $10,000

  • Capital stock: $40,000

  • Retained earnings: $12,000

  1. What are the company's total liabilities?

  2. What is the company's total equity?

Answers and explanations

  1. $28,000

    In the problem presented, total liabilities include accounts payable, accrued expenses, short-term notes, and long-term notes. To calculate the total liabilities, you need to add them up as follows: accounts payable of $5,000 plus accrued expenses of $6,000 plus short-term note of $7,000 plus long-term notes of $10,000 equals total liabilities of $28,000.

  2. $52,000

    In the problem presented, total equity includes capital stock and retained earnings. To calculate the total equity, you need to add them up as follows: capital stock of $40,000 plus retained earnings of $12,000 to give a total equity of $52,000.

If you need more practice on this and other topics from your accounting course, visit Dummies.com to purchase Accounting For Dummies! Featuring the latest information on accounting methods and standards, the information in Accounting For Dummies is valuable for anyone studying or working in the fields of accounting or finance.

About This Article

This article is from the book:

About the book authors:

Kenneth Boyd is the owner of St. Louis Test Preparation (www.stltest.net). He provides online tutoring in accounting and finance. Kenneth has worked as a CPA, Auditor, Tax Preparer, and College Professor. He is the author of CPA Exam For Dummies. Kate Mooney has been teaching accounting to both undergraduates and MBA students at St. Cloud State University since 1986, after earning her PhD from Texas A & M University. She is a licensed CPA in Minnesota and is a member of the State Board of Accountancy.

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