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Krammer company has liabilities equal to one-fourth of the total assets
Krammer company has liabilities equal to one-fourth of the total assets.
Krammer's owner's equity is $35,000.
Using the accounting equation, what is the amount of liabilities for Krammer?
Expert Solution
Liabilities of Krammer Company = one-fourth of the total assets.
Let the amount of liabilities be X.
Therefore,
X = Assets x 1/4
Assets = X x 4 = 4X
Owner's Equity = $35,000
As per the accounting equation,
Assets = Liabilities + Owner's Equity
Therefore, Liabilities = Assets - Owner's Equity
X = 4X - 35,000
4X - X = 35,000
3X = 35,000
X = 35,000/3 = $11,667
Total liabilities of Krammer Company = $11,667
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