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    Pay Cash for an Asset

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    Consider the balance sheet of Wilkes Industries as shown below. Because Wilkes has $800,000 of retained earnings, the company would be able to pay cash to buy an asset with a cost of $200,000.

    Cash $50,000
    Accounts payable $100,000
    Inventory $200,000
    Accruals $100,000
    Accounts receivable $250,000
    Total CL $200,000
    Total CA $500,000
    Debt $200,000
    Net fixed assets $900,000
    Common stock $200,000
    Retained earnings $800,000
    Total assets $1,400,000
    Total L & E $1,400,000

    True or False

    © BrainMass Inc. brainmass.com October 10, 2019, 4:11 am ad1c9bdddf
    https://brainmass.com/business/cash/pay-cash-asset-451199

    Solution Preview

    Company's Balance sheet before purchasing an asset is as under:

    Assets:

    Cash $50000
    Inventory $200000
    Account Receivable $250000
    Total Current assets> $500000
    Fixed assets $900000
    Total Assets ...

    Solution Summary

    This solution analyses the balance sheet of Wilkes Industries and determines if the company can pay cash to buy an asset with a cost of $200,000.

    $2.19