56. A corporation has liabilities of $100 million and owners' equity of $40 million. What is the amount of the asset balance?
Answer: A
The asset balance is $140 million.
To determine the asset balance, we apply the accounting equation, which states that assets equal liabilities plus owners' equity. In this case, the liabilities are $100 million, and the owners' equity is $40 million, resulting in a total asset balance of $140 million.
A) $140 million
Option A is correct because it accurately reflects the total assets calculated by adding liabilities ($100 million) to owners' equity ($40 million), resulting in $140 million.
B) $60 million
Option B is incorrect as it does not align with the fundamental accounting equation. This amount does not account for the total liabilities and owners' equity provided in the question.
C) $100 million
Option C is incorrect because it only represents the liabilities amount. It fails to consider the owners' equity, which is crucial for determining the total assets.
D) $40 million
Option D is incorrect as it only reflects the owners' equity and neglects the liabilities. This does not satisfy the accounting equation needed to find the asset balance.
Conclusion
The correct answer, $140 million, is derived from the proper application of the accounting equation, demonstrating the total assets as the sum of liabilities and owners' equity. All other options fail to represent the complete financial picture, as they either miscalculate or overlook the necessary components of the equation.