During Its First Year of Operations,a Company Entered into the Following

question 51

Multiple Choice

During its first year of operations,a company entered into the following transactions: Borrowed $20,000 from the bank by signing a promissory note.
Issued stock to owners for $40,000.
Purchased $4,000 of supplies on account.
Paid $1,600 to suppliers as payment on account for the supplies purchased.
What is the amount of total assets at the end of the year?

• A)$64,000
• B)$22,400
• C)$60,000
• D)$62,400

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Definitions:

Capital Lease

A lease agreement that allows a lessee to use an asset in exchange for payment, with terms that transfer substantially all risks and benefits of ownership.

Operating Leases

Leases used for short-term leasing of assets, where the lessee does not assume the risk of ownership, and the asset will be returned to the lessor at the end of the lease term.

Asset Turnover Ratio

A financial metric that measures the efficiency of a company's use of its assets to generate sales revenue, calculated by dividing sales revenue by the average total assets.

Operating Lease

Operating lease is a contract that allows for the use of an asset but does not convey rights of ownership of the asset.