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Roger Company’s Year 1 Balance Sheet has $150,000 in total assets and $100,000 in total liabilities. During the year, it paid off its $15,000 accounts payable using cash, and its accounts receivable increased by $4,000. It also bought $10,000 equipment using cash. If those are the only changes that occurred to Roger Company in Year 2, what are Roger Company’s total assets and liabilities at the end of Year 2?

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Answer:

The answer is: In year 2, Roger Company's total assets are $139,000 and its total liabilities are $85,000.

Explanation:

We start with total assets and liabilities:

Assets - we add accounts receivable and equipment, we subtract cash paid for accounts payable and equipment.

Liabilities - we subtract accounts payable that were paid off

                                                             Assets                   Liabilities

End of year 1                                      $150,000                $100,000

Accounts payable (paid)                                                    -$15,000

Cash (paid AP)                                   -$15,000

Accounts receivable (added)            $4,000

Equipment (added)                            $10,000

Cash (paid Equip)                              -$10,000                                          

End of year 2                                      $139,000                 $85,000

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