Question

Alexis Company was started in Year 1. At the end of Year 1 the Company had the following accounting equation.

Assets = Liabilities + Stockholders' Equity
Cash + Land = Notes Payable + Common Stock + Retained Earnings
600 2,200 1,000 1,400 400

During Year 2, the company experienced the following accounting events.
• Paid of $500 of its note payable.
• Earned $700 of cash revenue.
• Paid $400 of cash expenses.
• Paid a $100 cash dividend.

Based on this information alone, what percent of the company's total assets at the end of Year 2 were provided by creditors?

Answer 1

To determine the percent of the company's total assets at the end of Year 2 that were provided by creditors, calculate the total liabilities and divide by the total assets. The percent is 82.14%.

Step-by-step explanation:

To determine the percent of the company's total assets at the end of Year 2 that were provided by creditors, we need to calculate the total liabilities at the end of Year 2 and then divide it by the total assets.

Given the information, during Year 2, the company paid off $500 of its note payable, which means the note payable decreased by $500. Therefore, the new balance of the note payable is $1,400 - $500 = $900.

The total liabilities at the end of Year 2 is the sum of the notes payable and stockholders' equity: $900 + $1,400 = $2,300.

The total assets at the end of Year 2 are still the same as Year 1: $600 + $2,200 = $2,800.

To find the percent of the company's total assets provided by creditors, we divide the total liabilities by the total assets and multiply by 100: ($2,300 / $2,800) * 100 = 82.14%.