Problem:
Consider the balance sheet of Wilkes Industries as shown below. Because Wilkes has $800,000 of retained earnings, 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
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
True or False