Financial Accouting Hw2

Problem 2-3: Classified Balance Sheet:

RUTH CORPORATION

BALANCE SHEET

DECEMBER 31, 2012

Assets

Current assets:

Cash $ 13,230

Accounts receivable 23,450

Prepaid rent 1,500

Office supplies 2,340

Total current assets $ 40,520

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 $665,720

Liabilities

Current liabilities:

Accounts payable $ 18,255

Income taxes payable 6,200

Interest payable 1,500

Notes payable, due June 30, 2013 10,000

Salaries and wages payable 4,200

Total current liabilities $ 40,155

Long-term debt:

Bonds payable, due December 31, 2016 160,000

Total liabilities $200,155

Stockholders’ Equity

Contributed capital:

Capital stock, $10 par value,

15,000 shares issued and outstanding $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

$40,520 /$40,155 = 1.00 to 1

3. From the current ratio alone, Ruth appears to be somewhat liquid. At a 1 to 1 ratio, the company seems to be financially unhealthy.

Problem 2-6: Single-Step Income Statement:

SHAW CORPORATION

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2012

Revenues:

Sales $ 48,300

Interest 1,340

Rent 6,700

Total revenues $ 56,340

Expenses:

Cost of goods sold $ 29,200

Advertising 1,500

Commissions 2,415

Depreciation—office building 2,900

Interest 1,400

Insurance—salesperson’s auto 2,250

Salaries and wages—office 12,560

Supplies—office 890...