21. Bellow are the 2007 and 2008 year-end balance sheets for Tran Enterprises. T
ID: 2663005 • Letter: 2
Question
21. Bellow are the 2007 and 2008 year-end balance sheets for Tran Enterprises. The firm has never paid a dividend on its common stock, and it issues $2,400,000 of 10-year, non-callable, long term debt in 2007. As of the end of 2008, none of the principal on this debit has been repaid. Assume that the company’s sales in 2007 and 2008 were the same. Which of the following statements must be correct?Assets 2008 2007
Cash 200,000 170,000
Accounts receivable 864,000 700,000
Inventories 2,000,000 1,400,000
Total Current Assets 3,064,000 2,270,000
Net Fixed Assets 6,000,000 5,600,000
Total Assets 9,064,000 7,870,000
Liabilities and equity
Accounts Payable 1,400,000 1,090,000
Notes Payable 1,600,000 1,800,000
Total Current Liabilities 3,000,000 2,890,000
Long Term Debit 2,400,000 2,400,000
Common Stock 3,000,000 2,000,000
Retained Earnings 664,000 580,000
Total Common Equity 3,664,000 2,580,000
Total liabilities and Equity 9,064,000 7,870,000
a) The firm increased its short-term bank debit in 2008
b) The firm issues long term debit in 2008
c) The firm issued new common stock in 2008
d) The firm repurchased some common stock in 2008
e) The firm had negative net income in 2008
Explanation / Answer
Tran Enterprises Balance Sheet as on 2008 $ $ Assets Cash 200,000.00 Accounts receivable 864,000.00 Inventories 2,000,000.00 Total current assets 3,064,000.00 Net Fixed Assets 6,000,000.00 9,064,000.00 Liability and Equity Accounts payable 1,400,000.00 Notes payable 1,600,000.00 total current liabilities 3,000,000.00 Long term dibit 2,400,000.00 Common stock 3,000,000.00 Retained earnings (664,000.00) Total liabilities and equity 8,400,000.00 The balance shee of 2008 is not correct, as the negative retained earnings added to the common stock ,instead of deducted from that.
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