Pure Water\'s complete assets and liabilities are Accounts Receivable ($800), Eq

Question

Pure Water's complete assets and liabilities are Accounts Receivable ($800), Equipment ($10,000), Accounts Payable ($4,200), Prepaid Rent ($2,000), Supplies ($400), Bank Loan ($1,600), and Tools ($300). Pure Water's total equity is:

A. $15,700.

B. $7,700.

C. $7,300.

D. Cannot be determined from the information given.

E. None of these.

(True or False) The current ratio reflects current liabilities divided by current assets.

(True or False) A journal entry is always required for the amount of the difference between the balance per bank statement and balance per books.

Jordan erroneously credited a liability account rather than a revenue account. Therefore:

A. total assets are not affected.

B. expenses are understated.

C. ending stockholders' equity will be overstated.

D. liabilities are understated..

E. None of these.

Explanation / Answer

Total equity = Total assets-Total liabilities

= ($800+$10,000+$2,000+$400+$300)-($4,200+$1,600)

= $7,700

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