BALANCE SHEET 2008 (000) 2007 (000) ASSETS Current Assets Cash Accounts Receivab
ID: 2399285 • Letter: B
Question
BALANCE SHEET 2008 (000) 2007 (000) ASSETS Current Assets Cash Accounts Receivable, Net Inventory Prepaid Expense 90 800 1,400 60 2,350 2,650 5,000 300 500 900 60 1,760 2,240 4,000 Total Current Assets Plant & Equipment, Net Total Assets LIABILITIES Current Liabilities Bonds payable, 1090 1,400 600 2,000 750 600 1,350 Total Liabilities STOCKHOLDERS' EQUITY Preferred stock, 25 par, 7.5% Common stock, 10 par Retained earnings 400 500 400 500 1,750 2,100 Total stockholders equity Total liabilities & stockholders' equity 3,0002,650 5,000 4,000Explanation / Answer
Current Assets
Current Liabilities
Working Capital
Current Ratio
Acid Test Ratio
1: Declared a cash dividend
0 (no impact)
+(increase)
-(decrease)
-(decrease)
-(decrease)
2: Collected cash on accounts receivable
0 (no impact)
0 (no impact)
0 (no impact)
0 (no impact)
0 (no impact)
3: Paid in cash dividend
-(decrease)
-(decrease)
0 (no impact)
+(increase)
+(increase)
4: Borrowed cash on short term note
+(increase)
+(increase)
0 (no impact)
-(decrease)
-(decrease)
Working notes for understanding:
1)
Journal entry for declaration of dividend:
Retained Earnings Dr
Dividend Payable Cr
From the above journal entry, we can see that current liability (dividend payable) is increasing and there in no impact on current assets.
2)
Journal entry for collection of cash on accts receivable:
Cash Dr
Accounts Receivable Cr
From the above journal entry, we can see that current assets (cash) are increasing and current assets (accounts receivable) are also decreasing. So, there is no impact on current assets.
3)
Journal entry for payment of cash dividend:
Dividend Payable Dr
Cash Cr
From the above journal entry, we can see that current assets (cash) are decreasing and current liabilities (Dividend payable) are also decreasing.So, there is no impact on working capital.
4)
Journal entry for borrowing of short term note:
Cash Dr
Short term notes payable Cr
From the above journal entry, we can see that current assets (cash) are increasing and current liabilities (Short term notes payable) are also increasing. So, there is no impact on working capital.
Current Assets
Current Liabilities
Working Capital
Current Ratio
Acid Test Ratio
1: Declared a cash dividend
0 (no impact)
+(increase)
-(decrease)
-(decrease)
-(decrease)
2: Collected cash on accounts receivable
0 (no impact)
0 (no impact)
0 (no impact)
0 (no impact)
0 (no impact)
3: Paid in cash dividend
-(decrease)
-(decrease)
0 (no impact)
+(increase)
+(increase)
4: Borrowed cash on short term note
+(increase)
+(increase)
0 (no impact)
-(decrease)
-(decrease)
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