consider the following balance sheet: cash $70,000, accounts receivable $30,000,

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, 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. e) the company does not have the ability to pay $30,00 in salaries. 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. e) the company does not have the ability to pay $30,00 in salaries. 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. e) the company does not have the ability to pay $30,00 in salaries.

Explanation / Answer

Balance sheet have two side, assets and liabilities and both side must have equal total. In this view, there is no one side effect in the balance sheet can happen. So (c ) and (d) are the correct answer. Before Change Change after change Cash 70000 -30000 40000 Accounts Receivable 30000 0 30000 Inventories 50000 0 50000 Net Fixed Assets 350000 0 350000 500000 -30000 470000 Acounts Payable 30000 30000 Long term debt 20000.00 20000 Comon Stock 200000 200000 Retained Earnings 250000 -30000 220000 500000 -30000 470000

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