Question
Consider the following balance sheet: Cash $70,000 Accounts receivable $30,000 Inventories $50,000 Net fixed assets $350,000 Total assets $500,000 Accounts payable $30,000 Long-term debt $20,000
Consider the following balance sheet: Cash $70,000
Accounts receivable $30,000
Inventories $50,000
Net fixed assets $350,000
Total assets $500,000
Accounts payable $30,000
Long-term debt $20,000
Common stock $200,000
Retained earnings $250,000
Total liabilities and equity $500,000
Assume that the business uses $30,000 of its cash to pay salaries. Which of the following statements reflects the resulting balance sheet change?
A. There is a change to the left-hand side only.
B. There is a change to the right-hand side only.
C. The cash account decreases by $30,000, and the retained earnings account is reduced by $30,000.
D. The cash account decreases by $30,000, and the long-term debt account is reduced by $30,000. The company does not have the ability to pay $30,000 in salaries.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started