The Total Assets and the Total Liabilities of Paragon Services

question 5

Multiple Choice

The total assets and the total liabilities of Paragon Services are shown below. During the year, no additional capital contributions were made, and the business earned net income of $50,000. What was the amount of drawings taken during the year?

• A)$85,000
• B)$40,000
• C)$45,000
• D)$20,000

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Definitions:

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity of output produced, representing the per-unit cost of production.

Average Fixed Cost

The fixed costs of production divided by the quantity of output produced. This decreases as production increases.

Total Variable Costs

Expenses that change in proportion to the activity of a business such as materials, labor, and utilities, which vary with the level of output.

Average Fixed Cost

Production's fixed expenses (unchanged by the amount of production) split by the quantity of product made.