Finacial Accounting

Problem 2-3

1)

RUTH CORPORATION

BALANCE SHEET

DECEMBER 31, 2010

Assets

Current assets:

Cash $ 13,230

Accounts receivable 23,450

Inventory 45,730

Prepaid rent 1,500

Office supplies + 2,340

Total current assets $ 86,250

Long-term investments 85,000

Property, plant, and equipment:

Land 250,000

Automobiles $ 112,500

Less: Accumulated

Depreciation - 22,500 90,000

Buildings 200,000

Less: Accumulated

Depreciation - 40,000 + 160,000

Total property, plant, and

equipment 500,000

Intangible assets:

Patents 40,000

Total assets $ 711,250

Liabilities

Current liabilities:

Accounts payable $ 18,255

Income taxes payable 6,200

Interest payable 1,500

Notes payable, due June 30, 2011 10,000

Salaries and wages payable 4,200

Total current liabilities $ 40,155

Long-term debt:

Bonds payable, due December 31,

2014 160,000

Total liabilities $ 200,155

Stockholders' Equity

Contributed capital:

Capital stock, $10 par value $ 150,000

Paid-in capital in excess of par

value 50,000

Total contributed capital 200,000

Retained earnings 311,095

Total stockholders' equity 511,095

Total liabilities and stockholders'

equity $ 711,250

2) Current ratio = Current assets/Current liabilities

$86,250/$40,155 = 2.15 to 1

3) Due to Ruth’s current assets being higher than her current liabilities it seems that her company is liquid. I would like to see her cash flow and more specifically where her assets and liabilities are.

Exercise 2-6

1)

SHAW CORPORATION

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2010

Revenues:

Interest $ 1,340

Rent 6,700

Sales...