Turner Company reported assets of $20,000 (including cash of $9,000),liabilities of $8,000,common stock of $7,000,and retained earnings of $5,000.Based on this information,what can be concluded?
A)25% of Turner's assets are the result of prior earnings.
B)$5,000 is the maximum dividend that can be paid to shareholders.
C)40% of Turner's assets are the result of borrowing from creditors.
D)25% of Turner's assets are from prior earnings,$5,000 is the maximum possible dividend,and 40% of assets are the result of borrowed resources.

Question

Quizplus · Accepted Answer

Retained earnings of $5,000 is equal to 25% of the company's assets,indicating that 25% of Turner's assets are from prior earnings.$8,000,or 40%,of Turner's assets are liabilities,indicating that those assets are the result of borrowed resources.A company can pay out no more in dividends than it has in its Retained Earnings account.

Turner Company Reported Assets of $20,000 (Including Cash of $9,000),liabilities