Question

homework A Saved Help Save Exercise 3-1 (Algo) Balance sheet; missing elements (LO3-2, 3-3, 3-8] The following December 31, 2021, fiscal year-end account balance information is available for the Stonebridge Corporation: Cash and cash equivalents Accounts receivable (net) Inventory Property, plant, and equipment (net) Accounts payable Salaries payable Paid-in capital $ 6,000 30,000 70,000 178,000 49,000 21,000 150,000 The only asset not listed is short-term investments. The only liabilities not listed are $40,000 notes payable due in two years and related accrued interest of $1,000 due in four months. The current ratio at year-end is 1.6:1. Required: Determine the following at December 31, 2021: 1. Total current assets 2. Short-term investments 3. Retained earnings

Answer 1

Solution:

1. Total current Assets : Current assets include cash and cash equivalents, accounts receivable, inventory, prepaid liabilities and other liquid assets.

As per current ratio. i.e. Current Assets / Current liabilities. = 1.6 : 1.

And current liabilities is

• Accounts payable $ 49,000
• Salaries payable $ 21,000
• Accured interest payable in 4 months $ 1,000

Total current liabilities $ 71,000 .

Therefore , the Total Current Assets according to current ratio should be : $ 71,000 x 1.6 = 113,600  

2. Short term investment will be:

Total current Assets is $ 113,600 but as per balance sheet data given the short term investment is missing.

Therefore, the balancing figure will be short term investment

• Cash and cash equivalents: $ 6,000
• Accounts Receivables (net): $ 30,000
• Inventories: $ 70,000
• Short term investment . (B/f)    $ 7,600

Total current Assets   $ 113,600.

3. Retained Earnings:

Property, plant & equipment	$ 170,000
Add: Current Assets	$ 113,600
Total Assets	$ 283,600
Less: Current Liabilities	$ 71,000
Less: Long term liabilities (Notes Payable)	$ 40,000
Less: Paid in capital	$ 150,000
Retained Earnings	$ 22,600

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