Question

GANDER, INC. Balance Sheet As of December 31, 2018
Cash		$62,106		Accounts payable		$44,616
Accounts receivable		$24,948		Notes payable		$46,200
Inventories		$130,360		Interest payable		$2,310
Plant assets (net)		$150,000		Common stock		$250,000
				Retained earnings		$24,288
Total Assets	$367,414			Total Liabilities & Equity	$367,414

During 2018, the following occurred:

1. Customer sales on account $400,000.
2. Received payments from customers in cash $380,000.
3. Purchased merchandise on credit $220,000.
4. Paid cash to vendors $230,000.
5. Costs related to merchandise sold $170,000.
6. Operating expenses were paid in cash $80,000.
7. Interest paid on the note in cash $10,000.

There is additional information to consider. The note payable was issued on June 30, 2018, and is due in two years on June 30, 2020. Interest in the amount of 10% is paid annually on June 30^th. Depreciation on the plant assets for the year is $20,000. The original cost of the plant assets was $300,000.

Prepare a classified balance sheet for 2018. Calculate the current ratio and the debt to equity ratio.

Answer 1

Revised Answer

GANDER, INC Balance Sheet As of December 31, 2018 Assets Current assets: Cash Prepaid Interest Accounts Receivable Inventory Total current assets Property, plant and 122,106 3,070 44,948 180,360 $350,484 uipment: Plant Less: Accumulated Depreciation-Plant Total property, plant and 300,000 (170,000) 130,000 uipment Total assets Liabilities & Equity Current liabilities: Accounts Payable Interest payable Total current liabilities Notes payable Total liabilities Stockholders' equity Common Stock Retained Earnings Total stockholders' equity Total liabilities and stockholders' equit $480,484 34,616 34,616 $46,200 $80,816 250,000 149,668 $399,668 $480,484 Current Ratio Current Assets/ Current Liabilitie Total current assets Total current liabilities Current Ratio- 350,484 34,616 10.12 debt to equity ratio- The debt to equity ratio is calculated by dividing total liabilities by total equi Total liabilities Total stockholders' equit debt to equity ratio The debt to equity ratio shows the percentage of company financing that comes from creditors and investors A lower debt to equity ratio usually implies a more financially stable business 80,816 399,668 0.20

Note: Balance Sheet As of December 31, 2018 is already provided. The problem requires the Classified balance sheet for 2018, hence it is assumed that the other information related to Income statement is not required.

Please check if the years are wrongly mentioned in the question. I have prepared the classified balance sheet as at December 31, 2018 based on the balance sheet already provided.

GANDER, INC Balance Sheet As of December 31, 2018 Assets Current assets: Cash Accounts Receivable Inventory Total current assets Property, plant and 62,106 24,948 $130,360 $217,414 uipment: Plant Less: Accumulated Depreciation-Plant Total property, plant and 300,000 (150,000) 150,000 uipment Total assets Liabilities & Equity Current liabilities: Accounts Payable Interest payable Total current liabilities Notes payable Total liabilities Stockholders' equity Common Stock Retained Earnings Total stockholders' equity Total liabilities and stockholders' equit $367,414 44,616 2,310 46,926 $46,200 $93,126 250,000 24,288 $274,288 $367,414 Current Ratio Current Assets/ Current Liabilites Total current assets Total current liabilities Current Ratio- 217,414 46,926 4.63 debt to equity ratio- The debtto equity ratio is calculated by dividing total liabilities by total equit Total liabilities Total stockholders' equit debt to equity ratio - The debt to equity ratio shows the percentage of company financing that comes from creditors and investors A lower debt to equity ratio usually implies a more financially stable business 93,126 274,288 0.34

GANDER, INC Balance Sheet As of December 31, 2018 Assets Current assets: Cash Accounts Receivable Inventory Total current assets Property, plant and 62,106 24,948 $130,360 $217,414 uipment: Plant Less: Accumulated Depreciation-Plant Total property, plant and 300,000 (150,000) 150,000 uipment Total assets Liabilities & Equity Current liabilities: Accounts Payable Interest payable Total current liabilities Notes payable Total liabilities Stockholders' equity Common Stock Retained Earnings Total stockholders' equity Total liabilities and stockholders' equit $367,414 44,616 2,310 46,926 $46,200 $93,126 250,000 24,288 $274,288 $367,414 Current Ratio Current Assets/ Current Liabilites Total current assets Total current liabilities Current Ratio- 217,414 46,926 4.63 debt to equity ratio- The debtto equity ratio is calculated by dividing total liabilities by total equit Total liabilities Total stockholders' equit debt to equity ratio - The debt to equity ratio shows the percentage of company financing that comes from creditors and investors A lower debt to equity ratio usually implies a more financially stable business 93,126 274,288 0.34