Question

BAXTER COMPANY Balance Sheet August 31, 2017 ______________________________________________________________________ Assets Current Assets: Cash........................................................................................................ $23,600 Accounts receivable ............................................................................... 5,450 Supplies .................................................................................................. 950 Total current assets........................................................................... 30,000 Equipment .............................................................................................. 11,000 Total assets ...................................................................................... $41,000 (Cash Acc. rec. Sup. Equip.) Liabilities and Stockholders’ Equity Current Liabilities Accounts payable ............................................................................. $9,000 Stockholders’ equity Common stock................................................................................... 30,000 Retained earnings............................................................................. 2,000 32,000 Total liabilities and stockholders’ equity ..................................... $41,000 (Acct. pay. Com. stock. Ret. earn.) What percent of assets were financed by creditors and investors respectively in BAXTER COMPANY

Answer 1

22% by creditors and 78% by investors

Step-by-step explanation:

We just have to focus on the total assets, total liabilities and total stockholders' equity amounts.

As we have known, Assets = Liabilities + Stockholders' Equity

That is $41,000 = $9,000 + $32,000

To get the percent financed by creditors just divide the liabilities by the assets. So $9,000 / $41,000 will give us 0.22 or 22% financed by creditors.

Same goes for the percent financed by stockholders, just divide the stockholders' equity by the assets. So $32,000 / $41,000 will give us 0.78 or 78% financed by stockholders.

Take note that the total of the 2 percentages should equal to 100%.

To check 22% + 78% = 100%