Financial Accounting

Financial Accounting (MGMT 210)

2.4 Assignment: Homework 2

Problems 2-3 (Classified Balance Sheet)

1.

Ruth Corporation

Balance Sheet

At December 31, 2014

ASSETS

Current Assets

Cash $13,230

Accounts Receivable $23,450

Inventory $45,730

Office Supplies $2,340

Prepaid Rent $1,500

Total Current Assets $86,250

Investments

Long-Term Investments $85,000

Property, Plant, and Equipment

Land $250,000

Automobiles $112,500

Accumulate Depreciation -$22,500 = $90,000

Buildings $200,000

Accumulated Depreciation -$40,000 = $160,000

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, 2015 $10,000

Salaries and Wages Payable $4,200

Total Current Liabilities $40,155

Long Term Debt

Bonds Payable, Due December 31, 2018 $160,000

Total Liabilities $160,000

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

Retained Earnings $311,095

Total Stockholders Equity $511,095

Total Liabilities and Stockholders Equity $711,250

2. Ruth’s current ratio is 2.15:1 (CA/CL… 68,250/40,155)

3. In reference to page 66 in our text-book, Using Financial Accounting Information (Porter, Norton, 2015), I would say the Ruth Corporation is relatively liquid with its higher current assets/liabilities ratio. This denotes a healthy company and its ability to pay of debts with a good showing of revenue compared to debt. Other information that would be beneficial to answer this question more in depth would be the frequency of turnover on inventory, how long it takes to collect accounts receivable and what is the profit margin of each piece...