Question

Current Attempt in Progress The adjusted trial balance for Blue Spruce at December 31, 2019, contains the following accounts. Debit Credit Buildings $128,900 Common Stock $93,900 Accounts Receivable 14,300 Retained Earnings 25,000 43,100 Prepaid Insurance 4,900 Accumulated Depreciation-Buildings Cash 18,700 Accounts Payable 11,400 Equipment 61,200 Notes Payable 96,300 Land 68,200 600 7,100 Insurance Expense Accumulated Depreciation-Equipment Interest Payable Service Revenue 17,700 2,700 Depreciation Expense 16,500 Interest Expense 2,700 $306,600 $281,600 Prepare a classified balance sheet: assume that $21,000 of the note payable will be paid in 2020. (List Property, plant and equip buildings and equipment. List Current Assets in order of liquidity) Blue Spruce Balance Sheet December 31, 2019 Assets

Answer 1

Before preparing Balance sheet an income statement is required to be prepared to know the amount of net income.

Income statement of Blue Spruce

For the year ended 31st December 2019

Particulars	$	$
Service revenues		16,500
Less: operating expenses
Insurance expenses	600
Depreciation expense	7,100
		7,700
Operating income		8,800
Less: non operating expenses
Interest expenses		2,700
Net income		6,100

Blue Spruce

Balance sheet

As on 31st December 2019

Assets
Current Assets
Cash		$ 18,700
Prepaid expenses		$ 4,900
Account receivable		$ 14,300
Total current assets			$ 37,900
Non current assets
Land		$ 68,200
Building.	$ 128,900
Less: Accumulated depreciation - Building	$ 43,100
		$ 85,800
Equipment	$ 61,200
Less : Accumulated depreciation - equipment	$ 17,700
		$ 43,500
Total non current assets			$ 197,500
Total assets			$ 235,400
Liabilities and stockholders equity
Current liabilities
Accounts payable		$ 11,400
Interest payable		$ 2,700
Note payable (Assume that $ 21,000 note payable will be paid in 2020)		$ 21,000
Total current liabilities			$ 35,100
Non current liabilities
Note payable [ $ 96,300 - $ 21,000]		$ 75,300
Total non current liabilities			$ 75,300
Total liabilities			$ 110,400
Stockholders equity
Common stock		$ 93,900
Retained earnings		$ 25,000
Net income		$ 6,100
Total shareholders equity			$ 125,000
Total liabilities and shareholders equity			$ 235,400

Note: In the above Balance sheet note payable considered as current liability of $ 21,000. In the given question two contradictory instructions are given (1) $ 21,000 of note payable will be paid in 2020 and(2) 20,000 of note payable will be paid in 2020. here, in this statement first assumption has been considered .( $ 21,000 assumed to be paid in 2020)

current assets exceeds current liabilities by [ $ 37,900 - $ 35,100] = $ 2,800

Percentage of current assets in the form of cash = [ $ 18,700/ $ 37,900] X 100% = 49.34%

company's liquidity judged by current ratio .

current ratio = current assets / current liabilities

current ratio = $ 37,900 / $ 35,100 = 1.08:1

Company's net liquidity amount = $ 37,900 - $ 35,100 = $ 2,800