Consider the following balance sheet for Games Inc. Because Games has $800,000 of retained earnings, we know that the company would be able to pay cash to buy an asset with a cost of $200,000. Cash $50,000 Accounts payable $100,000 Inventory $200,000 Accruals $100,000 Accounts receivable $250,000 Total CL $200,000 Total CA $500,000 Long-term debt $200,000 Net fixed assets $900,000 Common stock $200,000 Retained earnings $800,000 Total assets $1,400,000 Total L & E $1,400,000 ?
Answer the following statement true (T) or false (F)
False
Rationale: Note that the firm has only $50,000 of cash. It would have to either sell assets or borrow $150,000 to pay cash for the new asset. That might not be possible.
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