Completing a Balance Sheet The following December 31, 2014, fiscal year-end acco
ID: 2416470 • Letter: C
Question
Completing a Balance Sheet
The following December 31, 2014, fiscal year-end account balance information is available for the Stonebridge Corporation:
Cash and cash equivalents: 3280
Accounts receivable (net): 18600
Inventories: 57000
Property, plant, and equipment (net): 119000
Accounts payable: 47700
Wages payable: 13600
Paid-in capital: 92900
The only asset not listed is short-term investments. The only liabilities not listed are a $34000 note payable due in two years and related accrued interest of $760 due in four months. The current ratio at year-end is 1.5:1.
Required:
Determine the following at December 31, 2014:
1. Total current assets
2. Short-term investments
3. Retained earnings
Please include as much detail as possible for how you found your answer.
Explanation / Answer
1. Total Current Investments & 2. Short-term investments:
Current Ratio = Current Assets / Current Liabilities = 1.5/1
Therefore, first of all we need to find Current Assets and Current Liabilities;
Current Assets:
Cash and cash equivalents: 3,280
Accounts receivable (net): 18600
Inventories: 57000
Short Term Investments: x (Since, not known, hence assuming to be x)
Total Current Assets: 78,880 + 'x'
Current Liabilities:
Accounts payable: 47,700
Wages payable: 13,600
Other Current Liabilities: 760
(Note:Since the Interest is payable in 4 months, hence classified as Current Liability.)
Total Current Liabilities: 62,060
Now, its given that Current Ratio is 1.5, therefore we would form an Equation, as follows:
Current Ratio = Current Assets / Current Liabilities = (78,880 + 'x') / 62,060. = 1.5
Solving the above equation would give the value of 'x', i.e Short Term Investments would be 14,210, and Total Current Assets would be 93,090.
3. Retained Earnings:
Now here, the Balance Sheet would stand as follows:
Assets:
Property, plant, and equipment (net): 1,19,000
Cash and cash equivalents: 3,280
Accounts receivable (net): 18,600
Inventories: 57,000
Short Term Investments: 14,210
Total: 212,090
Liabilities
Accounts payable: 47,700
Wages payable: 13,600
Paid-in capital: 92,900
Other Long term Liabilities (Payable) 34,000
Other Current Liabilities (Accrued Interest) 760
Retained Earnings (Balancing Figure) 23,130
Total 212,090
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