Blanche started a business by contributing $24 000 cash and a truck valued at $40 000. The company then purchased equipment by paying the $24 000 cash as a down payment (which accounted for half its purchase price), and financed the other half by signing a note payable at the bank. After the above transactions, Blanche's company balance sheet is: Assets Liabilities Owners' Equity
A) $64 000 $0$64 000
B) $88 000 $0$88 000
C) $88 000 $24 000$64 000
D) $112 000$24 000$88 000

Question

Quizplus · Accepted Answer

The total assets after the transactions are the truck ($40,000) plus the equipment ($48,000, since $24,000 was half its price), totaling $88,000. The liability is the note payable for the other half of the equipment's cost, $24,000. The owner's equity is the initial contribution ($24,000 cash + $40,000 truck = $64,000) since the cash was used to pay for half of the equipment, not adding to the initial equity.

Blanche Started a Business by Contributing $24 000 Cash and a Truck