Consider the balance sheet of Wilkes Industries as shown below. Because Wilkes h

Question

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 $100,000Inventory $200,000 Accruals $100,000Accounts receivable $250,000 Total CL $200,000Total CA $500,000 Debt $200,000Net fixed assets $900,000 Common stock $200,000 Retained earnings $800,000Total assets $1,400,000 Total L & E $1,400,000. Advise the options to buy or not to buy?

Explanation / Answer

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

Answer is False

Answer is b . False

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