Question

4. Assume a company's January 1, 2010, financial position was: Assets, $75,000 and Liabilities, $30,000. During January 2010, the company completed the following transactions: (a) paid on a note payable $5,000; (b) collected an accounts receivable, $4,000; (c) paid an accounts payable, $3,000; and (d) purchased a truck using $2,000 cash, and a $13,000 note payable. The company's January 31, 2010 financial position is

Assets Liabilities Stock holders equity

A) $83,000 $38,000 $45,000

B) $65,000 $35,000 $30,000

C) $78,000 $37,000 $41,000

D) $80,000 $35,000 $45,000

Answer 1

	Opening Assets	75000		Opening Liability	30000
	Less: Reduction is cash due to note payable	-5000		Less: Note Payables paid	-5000
	Add: Cash collection on account receivable	4000		Less: Reduction in liability due to paid an accounts payable	-3000
	Less:- Reduction of account receivable	-4000		Add: Purchase of truck through notes payable will result in increase in liability	13000
	Less: Reduction in cash due to paid an accounts payable	-3000		Total Liability	35000
	Add: Reduction of cash due to purchase of truck by paying 2000 in cash	-2000		Stockholder equity	45000	(refer note 5)
	Add: Purchase of Truck amounting 15000 will result in increase in assets	15000
	Total Assets	80000		Total stockholder equity and total liability	80000
	Note: 1: Paid Note Payable will reduce assests and also results in reduction in liability
	Note:2: Collected on accounts receivable will results in reduction of account receivable and increase in cash
	Note:3: Paid of accounts payable will result in decrease in assets and decrease in liability
	Note:4: Purchased a truck using cash result in reduction of cash by 2000 and 13000 by notes payable will result in increase in liability by 13000 and finally assets will increase by 15000
	Note:5: Assets = Liability + Stakeholder equity                80000 = 35000 + Stakeholder equity                stakeholder equity = 45000 (80000-35000)
	Correct answer is option D Assets: 80000 Liabilities: 35000 Stcokholder equity- 45000