The following December 31, 2021, fiscal year-end account balance information is available for the Stonebridge Corporation:
Cash and cash equivalents | $ | 6,300 | |
Accounts receivable (net) | 33,000 | ||
Inventory | 73,000 | ||
Property, plant, and equipment (net) | 185,000 | ||
Accounts payable | 52,000 | ||
Salaries payable | 24,000 | ||
Paid-in capital | 165,000 | ||
The only asset not listed is short-term investments. The only liabilities not listed are $43,000 notes payable due in two years and related accrued interest of $1,000 due in four months. The current ratio at year-end is 1.5:1.
Required:
Determine the following at December 31, 2021:
Account balances at the end of December 31, 2021 are:
Item | Amount |
Current Assets: | |
Cash and cash equivalents | $6,300 |
Accounts receivable (net) | $33,000 |
Inventory | $73,000 |
Short-term investments (See Note 2 below) | $60,000 |
Total Current Assets (See Note 1 below) | $180,000 |
Non-Current Assets: | |
Property, Plant and Equipment (net) | $185,000 |
Total Assets ($180,000 + $185,000) | $365,000 |
Current Liabilities: | |
Accounts payable | $52,000 |
Salaries payable | $24,000 |
Notes payable | $43,000 |
Accrued interest | $1,000 |
Total Current liabilities | $120,000 |
Equity: | |
Paid-in Capital | $165,000 |
Retained Earnings (See Note 3 below) | $80,000 |
Total Liabilities ($120,000 + $165,000 + $80,000) | $365,000 |
1) Calculation of Total current assets:
Given that the current ratio is 1.50 : 1
Current assets / Current liablities = 1.50
Current assets = 1.50 x Current liablities
Total Current assets = 1.50 x $120,000 = $180,000
2) Calculation of Short-term investments:
Short-term investments = Total Current assets - Total Current liabilities
= $180,000 - $120,000 = $60,000
3) Calculation of Retained Earnings:
Shareholders funds = Equity share capital + Retained Earnings
(OR)
Retained Earnings = Total assets - Total current liabilities - Equity share capital
Retained Earnings = $365,000 - $120,000 - $165,000 = $80,000
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