A firm’s balance sheet shows the following changes over the most recen

A firm’s balance sheet shows the following changes over the most recent quarter:

Cash increases by $1,000,000, long-term assets increase by $3,000,000, accounts payable increase by $750,000, long-term-debt increases by $1,000,000, retained earnings increase by $1,250,000, and new equity increases by $1,000,000. Which of the following statements must be TRUE?
A) Cash was a $1,000,000 source of funds for the firm.
B) Long-term debt was a $1,000,000 source of funds for the firm.
C) Because retained earnings increased by more than $500,000, the firm could not have realized a profit for the quarter.
D) All of the new equity must have been provided by investors who were not shareholders prior to the issuance of new equity.

ANSWER

B