Question

The following December 31, 2021, fiscal year-end account balance information is available for the Stonebridge Corporation: Cash and cash equivalents Nocounts receivable (net) Inventory Property, plant, and equipment (net) Accounts payable Salaries payable Paid-in capital $ 6,300 33,000 73,000 185,000 52,000 24,000 165,000 nces 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: 1. Total current assets 2. Short-term investments 3. Retained earnings

Answer 1

Given data

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