Question

Part 4 - Balance Sheet ***** The Balance Sheet is incomplete. Sterling has almost completed his balance sheet, but needs help with the following 4 pieces of information. Please add the information below and complete Sterling's balance sheet on the next page. 1. He has a balance of $5,400 in his checking account 2. He owes the feed store$4,200 3. Currently owns $4,000 worth of breeding bulls used in the cow-calf operation. 4. Lastly, Sterling owes $38,000 on the cow note amount left on note to be paid in next 6 years) Balance Sheet Questions: Complete the Balance Sheet and answer the questions. 1. What is the amount of owners' equity Sterling Peters has on 2/15/2021? 2. What is the debt-to-asset ratio? 3. Calculate the current ratio. 4. Calculate working capital.

Answer 1

Balance Sheet Sterling Peters As of February 15, 2021 Assets Liabilities Current Liabilities : Current Assets : Hay Wheat(Growing) Calves Accounts Receivable Stocks Bank Balance (Checking Account) $3,750 $6,300 $26,950 $1,600 $13,000 $5,400 Principal & Interest Due Mortgage Cow Loan Accounts Payable $14,000 $9,000 $4,200 Total Current Assets *57,000 Total Current Liabilities $27,200 Fixed Assets: Buildings/Improvements Machines/Equipment Land Cows Bulls $48,000 $96,000 $5,71,200 $68,900 $4,000 Long-Term Liabilities : Equipment Note Payable Mortgage Note Payable $52,000 $2,08,000 $38,000 Total Fixed Assets 7,88,100 Total Long-Term Liabilities $2,98,000 Total Liabilities Net Worth $5,19,900 Total Assets * 8,45,100 Total Liabilities and Net Worth $8,45,100 Note:- 1) Balance in a Checking Account(Current Account ) is a current asset. 2) Owing to a feed Store is a operating Liability, therefore classified as a current Liability. 3) Bulls are classified as fixed assets as they are used for a breeding for a long time. 4) Owing of Notes payable is a Long term Liability since the amount is to be paid in next 6 Years.

1. Owner's Equity: owner's equity or net worth of a company is total assets minus total liabilities. Net worth is given in the question, owner's equity is same as Net worth i.e $ 519,900 2.Debt to Asset Ratio: It shows how much percentage of the total assets is funded by the borrowings. Debt to Asset Ratio = Total Debt / Total Asset = ($ 27,200 + $ 298,000)/ $ 845,100 =0.38 Debt to ratio of 0.38 indicates that 38% of the total assets are funded by the liabilities. 3.Current Ratio: It is a Liquidity ratio that shows a company ability to pay short term obligation or those which falls due within one year. Current Ratio = Current assets/Current liabilities = $ 57000/ $ 27200. = 2.096 4.Working Capital: Working Capital = Current Assets-Current Liabilities = $ 57000-$ 27200 = $ 29,800.
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