In reviewing the company's balance sheet, Andy noticed that the total asset is stated as $5,500,000 and the total liability is $3,250,000. There is no paid-in capital or value for common stock. What are the company's retained earnings?

The answer is $2,250,000

Explanation:

If is no paid-in capital or value for common stock, then company's stakeholders' equity will be the same as retained earnings.

Stakeholders' equity is the residual interest in a company after its liability has been deducted from asset.

Therefore, we have:

Stakeholders' equity = asset - liability.

Total asset is $5,500,000

Total liability is $3,250,000.

Stakeholders' equity will now be:

$5,500,000 - $3,250,000

=$2,250,000