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Question
Below are the 2018 and 2019 year-end balance sheets for Tran Enterprises:
Assets: 2019 2018
Cash $ 200,000 $ 170,000
Accounts receivable 864,000 700,000
Inventories 2,000,000 1,400,000
Total current assets $3,064,000 $2,270,000
Net fixed assets 6,000,000 5,600,000
Total assets $9,064,000 $7,870,000
Liabilities and equity:
Accounts payable $1,400,000 $1,090,000
Notes payable to bank 1,600,000 1,800,000
Total current liabilities $3,000,000 $2,890,000
Long-term debt 2,400,000 2,400,000
Common stock 3,000,000 2,000,000
Retained earnings 664,000 580,000
Total common equity $3,664,000 $2,580,000
Total liabilities and equity $9,064,000 $7,870,000
The firm has never paid a dividend on its common stock, and it issued $2,400,000 of 10-year, non-callable, long-term debt in 2018. As of the end of 2019, none of the principal on this debt had been repaid. Assume that the companys sales in 2018 and 2019 were the same. Which of the following statements must be CORRECT?
a. The firm increased its short-term bank debt in 2019.
b. The firm issued long-term debt in 2019.
c. The firm issued new common stock in 2019.
d. The firm repurchased some common stock in 2019.
e. The firm had negative net income in 2018.
Answer
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