Question

Lily Company was started last year when Lily borrowed $70 cash from the local bank. Lily used that $70 cash to purchase inventory for $70. This year Lily Company sold that inventory for $100 cash. Which ONE of the following statements is TRUE with respect to Lily Company's balance sheet AFTER the sale of the inventory?a. Cash is $30.b. Accounts Payable is $30.c. Owners' Equity is $100.d. Owners' Equity is $30.e. Inventory is $30.

Answer 1

Answer:

d. Owners' Equity is $30

Explanation:

The owners equity is the amount of money that is own by the owner of the business or the business itself minus all of the debts that the business has, in this example, Lily just sold $100 in products, generating a profit of $30, because she bought that for $70, but she owns $70 of those $100 to the local bank, so eventhough she has $100, only $30 are actually owned by the business so Owner´s Equity equals $30.