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Question 10Use the balance sheet pictured to answer the following question.Balance SheetCurrent assetsAmount Cash$2,500 Accounts receivable$400 Inventory$400 Prepaid rent$10,000Long-term assets Equipment$3,900 Vehicle$25,000 Accumulated depreciation-$2,500 Furniture$2,200 Computers$2,600Total Assets$44,500If Eternal Summer purchased $500 worth of Inventory using their supplier credit line, what would the total assets be after the transaction? 1 point$44,000$44,500$45,000

Question

Question 10Use the balance sheet pictured to answer the following question.Balance SheetCurrent assetsAmount Cash2,500Accountsreceivable2,500 Accounts receivable400 Inventory400Prepaidrent400 Prepaid rent10,000Long-term assets Equipment3,900Vehicle3,900 Vehicle25,000 Accumulated depreciation-2,500Furniture2,500 Furniture2,200 Computers2,600TotalAssets2,600Total Assets44,500If Eternal Summer purchased 500worthofInventoryusingtheirsuppliercreditline,whatwouldthetotalassetsbeafterthetransaction? 1point500 worth of Inventory using their supplier credit line, what would the total assets be after the transaction? 1 point44,00044,50044,50045,000

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Solution

The total assets would be $45,000 after the transaction. Here's why:

The purchase of 500worthofinventoryusingtheirsuppliercreditlinewouldincreasethe"Inventory"underCurrentAssetsby500 worth of inventory using their supplier credit line would increase the "Inventory" under Current Assets by 500. This means the Inventory value would go from 400to400 to 900.

Since this purchase is made on credit, there is no immediate outflow of cash, so the Cash value remains the same.

The total assets are calculated by adding up all the assets. So, after the transaction, the total assets would be:

Cash: 2,500AccountsReceivable:2,500 Accounts Receivable: 400 Inventory: 900(increasedby900 (increased by 500 due to the transaction) Prepaid Rent: 10,000Equipment:10,000 Equipment: 3,900 Vehicle: 25,000AccumulatedDepreciation:−25,000 Accumulated Depreciation: -2,500 Furniture: 2,200Computers:2,200 Computers: 2,600

When you add all these up, you get 45,000.So,thetotalassetsafterthetransactionwouldbe45,000. So, the total assets after the transaction would be 45,000.

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