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Jones Enterprises was started when it acquired $6,000 cash from creditors and $10,000 from owners
Jones Enterprises was started when it acquired $6,000 cash from creditors and $10,000 from owners.
The company immediately purchased land that cost $12,000.
A. Record the events under an accounting equation.
B. After all the events have been recorded, Jones's obligations to creditors represent what percent of total assets?
C. After all the events have been recorded, Jones stockholders' equity represents what percent of total assets?
Expert Solution
A. Recording the events under an accounting equation is as follows:
| Assets = | Liabilities + | Stockholders' Equity | |
|---|---|---|---|
| Acquired $6,000 cash from creditors | $6,000 | $6,000 | - |
| Acquired $10,000 cash from owners | $10,000 | - | $10,000 |
| Purchased land worth $12,000 | $12,000 | - | - |
| ($12,000) | - | - | |
| Total | $16,000 | $6,000 | $10,000 |
B. After all the events have been recorded, Jones's obligations to creditors in percent of total assets is computed as follows:
| Obligations to creditors | $6,000 |
| Divide by: Total assets | $16,000 |
| Obligations to creditors to total assets ratio | 37.50% |
|---|
C. After all the events have been recorded, Jones stockholders' equity represents in percentage of total assets is computed as follows:
| Stockholders' Equity | $10,000 |
| Divide by: Total assets | $16,000 |
| Stockholders' Equity to total assets ratio | 62.50% |
|---|
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