Massimo Company has been operating for one year (2019). You are a member of the management...
Massimo Company has been operating for one year (2019). You are a member of the management team investigating expansion ideas, all of which will require borrowing funds from banks. At the start of 2020, Massimo’s T-account balances were as follows: Assets: Cash 1,200 Short-Term Investments 2,200 Property and Equipment 2,700 Liabilities: Short-Term Notes Payable 2,400 Long-Term Notes Payable 500 Shareholders’ Equity: Contributed Capital 1,020 Retained Earnings 2,180 Required:
1. Using the data from these T-accounts, complete the accounting equation on January 1, 2020:
2. Enter in the T-accounts the following transactions that occurred in 2020: Paid one-half of the principal on the long-term note payable. Sold $1,100 of the investments for $1,100 cash. Sold one-half of the property and equipment for $1,350 cash. Borrowed $2,200 from the bank and signed a note promising to pay the principal and interest at an annual rate of 5 percent in three years. Paid $520 in dividends to shareholders.
3. Compute ending balances in the T-accounts to complete the statement of financial position on December 31, 2020:
4. Using the ending balances in the T-accounts, prepare a classified statement of financial position at December 31, 2020, in good form.
5. Calculate the current ratio at December 31, 2020. (Round the final answer to 2 decimal places.)
Homework Answers
Please find workings.
| Cash Account | |||||||
| Date | $ Amount | Date | $ Amount | ||||
| To opening balance | 1200 | By Long term notes | 250 | ||||
| To Investment(sales) | 1100 | payable | |||||
| To Property & equipment | 1350 | By dividends | 520 | ||||
| ( sales) | |||||||
| To Bank loan | 2200 | ||||||
| By closing balance | 5,080 | ||||||
| 5,850 | 5,850 | ||||||
| Short Term Investment | |||||||
| Date | $ Amount | Date | $ Amount | ||||
| To opening balance | 2200 | By cash | 1,100 | ||||
| (Sales) | |||||||
| By closing balance | 1,100 | ||||||
| 2,200 | 2,200 | ||||||
| Prpoerty & Equipment | |||||||
| Date | $ Amount | Date | $ Amount | ||||
| To opening balance | 2700 | By cash | 1,350 | ||||
| (Sales) | |||||||
| By closing balance | 1,350 | ||||||
| 2,700 | 2,700 | ||||||
| Short Term Notes Payable | |||||||
| Date | $ Amount | Date | $ Amount | ||||
| By opening balance | 2,400 | ||||||
| By closing balance | 2,400 | ||||||
| 2,400 | 2,400 | ||||||
| Long Term Notes Payable | |||||||
| Date | $ Amount | Date | $ Amount | ||||
| To cash (paid) | 250 | By opening balance | 500 | ||||
| By Bank loan | 2200 | ||||||
| To closing balance | 2,450 | ||||||
| 2,700 | 2,700 | ||||||
| Long Term Notes Payable | |||||||
| Date | $ Amount | Date | $ Amount | ||||
| By capital | 1,020 | ||||||
| To dividends | 520 | By retained earnings | 2180 | ||||
| To closing balance | 2,680 | ||||||
| 3,200 | 3,200 |
| Balance Sheet | |||||
| Assets | Liabilites | ||||
| Current Assets | Share Holders Fund | ||||
| Cash | 5,080 | Equity | 1020 | ||
| Short term Note payable | 1,100 | 6,180 | Retained earnings | 1660 | 2680 |
| Non current Assets | Current Liabilites | ||||
| Property & Equipment | 1350 | Short termNotes payable | 2400 | ||
| Non Current liaibilites | |||||
| Long term notes payable | 2450 | ||||
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