1) Assume that a business's balance sheet reports total assets of $500,000 and total liabilities of $300,000. Now assume that $20,000 of net fixed assets (net plant and equipment) are written off due to technological obsolescence. All else the same, what is the total equity of the business after the write-off?

$190,000

There is insufficient information given to answer this question.

$200,000

$170,000

$180,000



2) Consider the following balance sheet:

Cash $ 70,000Accounts payable $ 30,000

Accounts receivable 30,000Long-term debt 20,000

Inventories 50,000Common stock 200,000

Net fixed assets 350,000Retained earnings 250,000

Total assets $500,000Total claims $500,000

Which of the following statements is most correct?



The business, in the aggregate over time, has been profitable.

The business is not-for-profit.

The business has a short-term bank loan outstanding.

The business is probably using too much debt financing.

The business has $450,000 in its equity accounts (common stock and retained earnings); thus, it has this much money available to spend on new facilities.





Thank you!