A Corporation Had Total Assets of $40,000, Total Liabilities of $20,000

question 105

Multiple Choice

A corporation had total assets of $40,000, total liabilities of $20,000, and total contributed capital of $8,000 at the beginning of the year. For the year, the corporation earned net income of $50,000 and paid cash dividends of $10,000. At the end of the year, the company had total assets of $80,000 and its total contributed capital remained at $8,000. At the end of the year, the corporation had total liabilities of:

• A) $-0-
• B) $20,000
• C) $28,000
• D) $32,000

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Definitions:

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit customers.

Current Ratio

A measure of a company’s capability to settle short-term debts using its current assets.

Acid-Test Ratio

A stringent indicator of a company's short-term liquidity, calculated by dividing liquid assets by current liabilities, excluding inventory from assets.

Financial Stability

The condition of having strong financial health, characterized by a solid balance sheet, manageable debt, and the capability to meet short and long-term obligations.