Type your question h 10. Consider the following balance sheet: Cash $ 70,000Acco
ID: 2696092 • Letter: T
Question
Type your question h
10. Consider the following balance sheet:
Cash $ 70,000Accounts payable $ 30,000
Accounts receivable 30,000Long-term debt 20,000
Inventories 50,000Common stock 200,000
Net fixed assets 350,000Retained earnings 250,000
Total assets $500,000Total claims $500,000
Assume that the business uses $10,000 of its cash to pay for supplies that were ordered on credit terms and have already been received and booked (recorded on the balance sheet). Which of the below statements reflects the resulting balance sheet change?
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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 $10,000 and the retained earnings account decreases by $10,000.
d. The cash account decreases by $10,000 and the accounts payable account decreases by $10,000.
e. The cash account decreases by $10,000 and the supplies account increases by $10,000.
Explanation / Answer
The entry for payment will be :
Accounts payable dr 10000, cash cr 10000
Thus, D ie cash decreases by 10000 & accounts payable decreases by 10000.
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