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What was the amount of liabilities on Lexington's balance sheet at the end of Year 2? Multiple Choice $440. $960. ($1,440). $700.

What was the amount of liabilities on Lexington's balance sheet at the end of Year 2? Multiple Choice $440. $960. ($1,440). $700.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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### Multiple Choice Question on Liabilities **Question:** What was the amount of liabilities on Lexington's balance sheet at the end of Year 2? **Options:** - A. $440 - B. $960 - C. ($1,440) - D. $700 --- The question provides four multiple choice options regarding the amount of liabilities recorded on Lexington's balance sheet at the conclusion of the second year. The goal is to assess your understanding of balance sheet liabilities by selecting the correct value based on given data or prior knowledge of Lexington's financial records.
Transcribed Image Text:### Multiple Choice Question on Liabilities **Question:** What was the amount of liabilities on Lexington's balance sheet at the end of Year 2? **Options:** - A. $440 - B. $960 - C. ($1,440) - D. $700 --- The question provides four multiple choice options regarding the amount of liabilities recorded on Lexington's balance sheet at the conclusion of the second year. The goal is to assess your understanding of balance sheet liabilities by selecting the correct value based on given data or prior knowledge of Lexington's financial records.
**Understanding Lexington Company's Financial Transactions: Year 1 and Year 2** Lexington Company engaged in various financial transactions during its first two years of operation. Given these activities, we can analyze how the inflows and outflows of cash impacted the company's financial standing. Let's explore these transactions in detail. ### Year 1 Transactions (All transactions are cash-based) 1. **Acquired $3,400 cash from issuing common stock.** - This represents equity financing, where the company raised funds by selling shares of common stock. 2. **Borrowed $2,400 from a bank.** - This indicates debt financing, where the company took a loan from a bank, thus creating a liability. 3. **Earned $3,300 of revenues.** - Revenue reflects the income generated from the company's business operations. 4. **Incurred $2,440 in expenses.** - Expenses account for the cost incurred by the company in its attempt to generate revenues. 5. **Paid dividends of $440.** - Dividends represent the distribution of a portion of the company's earnings to its shareholders. ### Year 2 Transactions (All transactions are cash-based) 1. **Acquired an additional $700 cash from the issue of common stock.** - Similar to the activity in Year 1, this shows the company raised additional equity through the issuance of more stock. 2. **Repaid $1,440 of its debt to the bank.** - This transaction reflects the reduction of the company's liabilities through the repayment of part of the loan taken in Year 1. 3. **Earned revenues of $4,700.** - The company continued to generate income from its operations. 4. **Incurred expenses of $2,830.** - Operating costs incurred by the company for generating revenue. 5. **Paid dividends of $880.** - Distribution of the company’s profits to shareholders, which increased compared to the previous year. ### Analyzing Liabilities at the End of Year 2 To determine the amount of liabilities on Lexington's balance sheet at the end of Year 2, we consider the debt activities over the two years: 1. **Initial borrowing in Year 1:** $2,400 2. **Repayment in Year 2:** $1,440 Remaining liability at the end of Year 2: \[ \$
Transcribed Image Text:**Understanding Lexington Company's Financial Transactions: Year 1 and Year 2** Lexington Company engaged in various financial transactions during its first two years of operation. Given these activities, we can analyze how the inflows and outflows of cash impacted the company's financial standing. Let's explore these transactions in detail. ### Year 1 Transactions (All transactions are cash-based) 1. **Acquired $3,400 cash from issuing common stock.** - This represents equity financing, where the company raised funds by selling shares of common stock. 2. **Borrowed $2,400 from a bank.** - This indicates debt financing, where the company took a loan from a bank, thus creating a liability. 3. **Earned $3,300 of revenues.** - Revenue reflects the income generated from the company's business operations. 4. **Incurred $2,440 in expenses.** - Expenses account for the cost incurred by the company in its attempt to generate revenues. 5. **Paid dividends of $440.** - Dividends represent the distribution of a portion of the company's earnings to its shareholders. ### Year 2 Transactions (All transactions are cash-based) 1. **Acquired an additional $700 cash from the issue of common stock.** - Similar to the activity in Year 1, this shows the company raised additional equity through the issuance of more stock. 2. **Repaid $1,440 of its debt to the bank.** - This transaction reflects the reduction of the company's liabilities through the repayment of part of the loan taken in Year 1. 3. **Earned revenues of $4,700.** - The company continued to generate income from its operations. 4. **Incurred expenses of $2,830.** - Operating costs incurred by the company for generating revenue. 5. **Paid dividends of $880.** - Distribution of the company’s profits to shareholders, which increased compared to the previous year. ### Analyzing Liabilities at the End of Year 2 To determine the amount of liabilities on Lexington's balance sheet at the end of Year 2, we consider the debt activities over the two years: 1. **Initial borrowing in Year 1:** $2,400 2. **Repayment in Year 2:** $1,440 Remaining liability at the end of Year 2: \[ \$
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