Question

Stiner Company has the following selected accounts after posting adjusting entries: Accounts Payable 45.000 Notes Payable, 3-month 80,000 Accumulated Depreciation Equipment 14,000 Payroll and Benefits Payable 27,000 Notes Payable, 5-year, 8% 30,000 Estimated Warranty Liability 34,000 Payroll Tax Expense 6,000 Interest Payable 3,000 Mortgage Payable 200,000 Sales Tax Payable 16,000 Instructions (a) Prepare the current liability section of Stiner Company's balance sheet, assuming $25,000 of the mortgage is payable next year. (List liabilities in magnitude order, with largest first.) (b) Comment on Stiner's liquidity, assuming total current assets are $450,000

Answer 1

a.

Balance Sheet
Liabilities Section
Current liabilities:
Note payable, 3 month	80,000
Accounts payable	45,000
Estimated warranty liability	34,000
Payroll and benefits payable	27,000
Mortgage payable	25,000
Sales tax payable	16,000
Interest payable	3,000
Total Current liabilities	$230,000

b.

Current assets = $450,000

Current liabilities = $230,000

Current ratio = Current assets / Current liabilities

= 450,000/230,000

= 1.96

Since current assets are more than current liabilities and current ratio is fairly enough, hence liquid position of Stiner is good.

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