Chestnut, Incorporated Reported the Following Balances on Its Balance Sheet

question 33

Multiple Choice

Chestnut, Incorporated reported the following balances on its balance sheet at December 31, Year 1: On January 1, Year 2, Chestnut purchased equipment for $40,000 on account. What is the company's debt-to-assets ratio immediately after the purchase of the equipment?

• A)0.42
• B)0.46
• C)0.37
• D)0.34

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Definitions:

Fair Value

The amount one would receive from selling an asset or the cost to transfer a liability during a systematic transaction among market participants on the date of valuation.

Partnership Interest

An ownership share or interest in a partnership, representing a partner's stake in the profits, losses, and assets of the business.

Appraisal

The process of professionally evaluating the market value of a property or asset.

Partnership Capital

The total amount of capital contributed by partners in a partnership, used in the business and subject to changes from profits, losses, and withdrawals.