Consider the following balance sheet, for Games Inc. Because Games has $800,000 of retained earnings, we know that the company would be able to pay cash to buy an asset with a cost of $200,000.
|
Cash |
$50,000 |
Accounts payable |
$100,000 |
|
Inventory |
200,000 |
Accruals |
100,000 |
|
Account 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 |
a. True
b. False