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Consider the Balance Sheet of Wilkes Industries as Shown Below

Question 81

Multiple Choice

Consider the balance sheet of Wilkes Industries as shown below.Wilkes has $1,000,000 in common stocks and retained earnings.As a result we can state which of the following regarding Wilkes?  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\begin{array}{|l|r|l|l|r|}\hline \text { Cash } & \$ 50,000 & &\text { Accounts payable } & \$ 100,000 \\\hline \text { Inventory } & 200,000 & &\text { Accruals } & \underline{100,000} \\\hline \text { Accounts receivable } & 250,000 && \text { Total CL } & \$ 200,000 \\\hline \text { Total CA } & \$ 500,000 && \text { Debt } & 200,000 \\\hline \text { Net fixed assets } & \$ 900,000 && \text { Common stock } & 200,000 \\\hline & && \text { Retained earnings } & 800,000 \\\hline \text { Total assets } & \mathbf{\$ 1 , 4 0 0 , 0 0 0} && \text { Total L \& E } & \mathbf{\$ 1 , 4 0 0 , 0 0 0} \\\hline\end{array}


A) that it 80% of Wilkes shareholder equity comes from issuing more stock.
B) 20% of Wilkes shareholder equity comes from accumulated profitable earnings of prior years operations.
C) They 80% of Wilkes shareholder equity comes from accumulated profitable earnings of prior years operations..
D) Wilkes Industries has had consistently unprofitable operations as indicated by the low common equity relative to its retained earnings.

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