Lexington Company Engaged in the Following Transactions During Year 1

question 58

Multiple Choice

Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1. Acquired $6,000 cash from issuing common stock.
2) Borrowed $4,400 from a bank.
3) Earned $6,200 of revenues.
4) Incurred $4,800 in expenses.
5) Paid dividends of $800.
Lexington Company engaged in the following transactions during Year 2:
1) Acquired an additional $1,000 cash from the issue of common stock.
2) Repaid $2,600 of its debt to the bank.
3) Earned revenues, $9,000.
4) Incurred expenses of $5,500.
5) Paid dividends of $1,280.
Total liabilities on Lexington's balance sheet at the end of Year 1 equal:

• A) $1,000.
• B) $4,400.
• C) ($2,600).
• D) $480.

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Definitions:

U.S. Treasury Deposits

Funds held at the Federal Reserve that belong to the U.S. Treasury, often from revenues or borrowing, used for government spending.

Certificates of Deposit

Savings certificates with a fixed maturity date, specified fixed interest rate and can be issued in any denomination aside from minimum investment requirements.

Required Reserve Ratio

The fraction of deposits that regulators require a bank to hold in reserves and not lend out.

Money Supply

The sum of all financial resources in the form of cash, coins, and amounts in checking and savings accounts present within an economy at a given moment.