On 31 May, after many months of planning, Macy opened a bike shop by investing $10 000 of his own money. On 31 May he spent 20% of it to pay the rent for three months from 1 June on a store location, and the balance on furnishings and fixtures that had been delivered and set up the night before. A friend had loaned Macy $6000, all of which he used to purchase inventory on 31 May, prior to opening. If Macy prepared a balance sheet as at 31 May, what would be the balances for total assets and total liabilities? Total Assets Total Liabilities
A) $10 000 $6000
B) $14 000 $6000
C) $16 000 $6000
D) $16 000 $10 000

Question

Quizplus · Accepted Answer

- Macy invested $10 000 of his own money and spent 20% of it on rent, which is 0.2 x $10 000 = $2000. Therefore, the balance he spent on furnishings and fixtures is $10 000 - $2000 = $8000.
- Macy also used the $6000 loan from his friend to purchase inventory.
- Therefore, total assets as at 31 May would be $10 000 (Macy's investment) + $8000 (balance spent on furnishings and fixtures) + $6000 (inventory purchased with the loan) = $24 000.
- Total liabilities would be $6000 (loan from friend), since Macy did not owe any other debts or have any outstanding bills as at 31 May.
- Therefore, the best choice is C.

On 31 May, After Many Months of Planning, Macy Opened