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On June 1st, a firm's balance sheet shows assets of $6,400,000 and owners' equity of $2,000,000
On June 1st, a firm's balance sheet shows assets of $6,400,000 and owners' equity of $2,000,000. What is the amount of the firm's liabilities?
A) $2,400,000
B) $4,400,000
C) $6,400,000
D) $8,400,000
Expert Solution
Answer: B) $4,400,000
Explanation:
Firm's liabilities is computed using the basic accounting equation, as follows:
Assets = Liabilities + Owners' Equity
Liabilities = Assets - Owners' Equity
Liabilities = $6,400,000 - $2,000,000
Liabilities = $4,400,000
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