Question

During its first month of operations, Donald Company borrowed $100,000 from a bank, and then purchased an equipment costing $40,000 by paying cash of $20,000 and signing a long term note for the remaining amount. During the month, the company also purchased Inventory for $30,000 on credit, performed services for clients for $10,000 on account, paid $15,000 cash for accounts payable, and paid $30,000 cash for utilities. What is the amount of total assets at the end of the month?
(A) $125,000
(B) $115,000
(C) $135,000
(D) $ 95,000

Answer 1

Answer:

(B) $115,000

Explanation:

Assets movements during the period:

+100,000 cash from loan

+40,000 new equipment

-20,000 cash disbursement on purchase of equipment

+30,000 inventory (purchased on credit)

+10,000 accounts receivable sales (on credit)

-15,000 cash disbursement for account payable

-30,000 cash disbursement for utilities:

115,000

We will focus on the asset movements.

Remember Assets are thing or right the company has and will use them to generate earnings in the future or convert into cash