A company has $26,000 in its Land account, $10,000 in its Inventory account, and $6,000 in its Notes Payable (short-term) account

Accounting Dec 16, 2020

A company has $26,000 in its Land account, $10,000 in its Inventory account, and $6,000 in its Notes Payable (short-term) account. If its only other account is Common Stock, what is the balance of that account?

Expert Solution

To find out what this company has in the Common Stock, we will first add up its assets and then subtract its liabilities:

Assets
- Land Account - $26,000
- Inventory Account - $10,000
- Total Assets - $36,000

Now we subtract its liabilities:

$36,000 - $6,000 = $30,000

Since we know that the company's accounts must be in balance because:

Assets = Liabilities + Equity

We, therefore, deduce that the Common Stock account must be $30,000.

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