The current asset section of Sanford & Son, CPA’s balance sheet consists of cash
ID: 2424440 • Letter: T
Question
The current asset section of Sanford & Son, CPA’s balance sheet consists of cash,
accounts receivable, investments, and prepaid expenses. The 2013 balance sheet
reported the following: cash, $110,000; investments, $22,000; prepaid expenses,
$18,000; noncurrent assets, $422,000; and shareholders’ equity, $350,000. The
current ratio at the end of the year was 1.6 and the debt to equity ratio was .8.
Required: Determine the following 2013 amounts and ratios:
a. Current liabilities.
b. The acid-test ratio.
c. Accounts receivable.
d. Long-term liabilities.
Explanation / Answer
Particulars
2013
Particulars
2013
Cash
110000
Current Liabilities
130000
Accounts Receivables
58000
Long term liabilties
150000
Investment
22000
Total Libilities
280000
Prepaid expenses
18000
Currebt Assets
208000
Non current assets
422000
Shareholder's Equity
350000
630000
630000
Debt Equity ratio = Total liabilities/Equity
.8 = Total Liabilities/350000
Total Liabilities = 350000*.8
Total Liabilities = 280000
Total liabilities + shareholder’s Equity = Total assets
280000+350000 =(110000+22000+18000+422000+Accounts Receivable)
Accounts Receivables = 58000
Current Ratio = Current Assets/Current Liabilities
1.6 = (110000+58000+22000+18000)/Current liabilities
Current Liabilities = 208000/1.6
= 130000
Acid test ratio = (Cash + Account receivables + short term Investment)/Current Liabilities
= (110000+58000+22000)/130000
= 1.46
Particulars
2013
Particulars
2013
Cash
110000
Current Liabilities
130000
Accounts Receivables
58000
Long term liabilties
150000
Investment
22000
Total Libilities
280000
Prepaid expenses
18000
Currebt Assets
208000
Non current assets
422000
Shareholder's Equity
350000
630000
630000
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