Question

on the december 31, 2020 balance sheet, broome agency reported assets of $3,288,000 and liabilities of $1,293,000. in 2021, broome increased assets by $512,000 and increased liabilities by $249,000. how would this change affect their ability to repay their maturing debts in 2022? select answer from the options below their ability to repay maturing debts would increase. their ability to repay maturing debts would decrease. they would likely be unable to pay their maturing debts. their ability to repay maturing debts would stay the same.

Answer 1

Broome Agency's net assets increased by $263,000 from 2020 to 2021, suggesting an increased ability to repay maturing debts in 2022.

Step-by-step explanation:

On December 31, 2020, Broome Agency reported assets of $3,288,000 and liabilities of $1,293,000. Throughout 2021, Broome increased its assets by $512,000 and liabilities by $249,000. To assess how this would affect their ability to repay maturing debts in 2022, we can calculate Broome's net assets before and after these changes. Initially, Broome's net assets were $3,288,000 - $1,293,000 = $1,995,000. After the increases in 2021, Broome's net assets would be $(3,288,000 + 512,000) - ($1,293,000 + 249,000) = $2,258,000. The $263,000 increase in net assets (equity) suggests that Broome's ability to repay maturing debts would increase.