Total Assets and Total Liabilities Were $31,000 and $26,000 Respectively

question 74

Multiple Choice

Total assets and total liabilities were $31,000 and $26,000 respectively at the beginning of the period. Assets increased by 20% and liabilities increased by 10% during the period. What is the owner's equity at the end of the period?

• A)$8,600
• B)$65,800
• C)$290
• D)$5,000

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Definitions:

Average Accounting Return

The average accounting return is a financial ratio that measures the profitability of an investment as the average net income the investment generates divided by the book value of the investment's initial cost.

Straight Line Method

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Crossover Rate

The crossover rate refers to the point at which two different projects have the same net present value (NPV), used in capital budgeting to compare the desirability of investments or projects.