Exercise 9-14A Preparing a Classified Balance Sheet
Required:
Use the following information to prepare a classified balance sheet for Alpha Co. at the end of Year 1:
Accounts receivable: $26,500
Accounts payable: $12,200
Cash: $20,500
Common stock: $30,000
Land: $10,000
Long-term notes payable: $17,500
Merchandise inventory: $26,300
Retained earnings: $23,600
Exercise 9-15A Using the Current Ratio to Make Comparisons
The following information was drawn from the balance sheets of the Kansas and Montana companies:
| Kansas | Kansas | Montana |
|---|---|---|
| Current assets | $59,000 | $78,000 |
| Current liabilities | 40,000 | 43,000 |
Required:
a. Compute the current ratio for each company.
b. Which company has the greater likelihood of being able to pay its bills?
c. Assume that both companies have the same amount of total assets. Speculate as to which company would produce the higher return-on-assets ratio.
Exercise 9-16A Effect of a Discount Note on Financial Statements (Appendix)
Helen Parish started a design company on January 1, Year 1. On April 1, Year 1, Parish borrowed cash from a local bank by issuing a one-year $120,000 face value note with annual interest based on an 8 percent discount. During Year 1, Parish provided services for $72,000 cash.
Required:
Answer the following questions. (Hint: Record the events in T-accounts prior to answering the questions.)
a. What is the amount of total liabilities on the December 31, Year 1, balance sheet?
b. What is the amount of net income on the Year 1 income statement?
c. What is the amount of cash flow from operating activities on the Year 1 statement of cash flows?
d. Provide the general journal entries necessary to record issuing the note on April 1, Year 1; recognizing accrued interest on December 31, Year 1; and repaying the loan on March 31, Year 2.
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