Question

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

Assets (Cash[$600] + Land[$2,200]) = Liabilities (Notes Payable[$1,000]) + Stockholders' Equity (Common Stock[$1,400] + Retained Earnings[$400])
During Year 2, the company experienced the following accounting events.
a-Paid of $500 of its note payable.
b-Earned $700 of cash revenue.
c-Paid $400 of cash expenses.
d-Paid a $100 cash dividend.
Based on this information alone, what percent of the company's assets at the end of Year 2 were provided by creditors?

Answer 1

The percent of the company's assets provided by creditors at the end of Year 2 is 15.15%.

Step-by-step explanation:

To determine the percent of the company's assets provided by creditors at the end of Year 2, we need to look at the changes in liabilities compared to the total assets. Based on the given information, in Year 2, the company paid off $500 of its note payable. This reduces the liabilities by $500. Therefore, the amount provided by creditors at the end of Year 2 is $1,000 - $500 = $500.

To calculate the percentage, we divide the amount provided by creditors ($500) by the total assets at the end of Year 2, which is the sum of cash, land, and the remaining note payable ($600 + $2,200 + $500 = $3,300).

The percent of the company's assets provided by creditors at the end of Year 2 is ($500 / $3,300) x 100 = 15.15%.