Reference no: EM131055663
Consider the following balance sheet: Cash $70,000
Accounts receivable $30,000
Inventories $50,000
Net fixed assets $350,000
Total assets $500,000
Accounts payable $30,000
Long-term debt $20,000
Common stock $200,000
Retained earnings $250,000
Total liabilities and equity $500,000
Assume that the business uses $30,000 of its cash to pay salaries. Which of the following statements reflects the resulting balance sheet change?
A. There is a change to the left-hand side only.
B. There is a change to the right-hand side only.
C. The cash account decreases by $30,000, and the retained earnings account is reduced by $30,000.
D. The cash account decreases by $30,000, and the long-term debt account is reduced by $30,000. The company does not have the ability to pay $30,000 in salaries.
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