Several accounts that appeared on Kruse’s 2016 balance sheet are as follows: Accounts payable                                $55,000     Equipment                                     $950,000 Marketable securities                            40,000     Taxes payable                                    15,000 Accounts receivable                            180,000     Retained earnings                            250,000   Notes payable, 10%, due in 60 days     20,000     Inventory                                           85,000 Capital stock                                     1,150,000    Allowance for doubtful accounts       20,000 Salaries payable                                     10,000    Land                                                  600,000 Cash                                                       15,000 Prepare the current liabilities section of Kruse’s 2016 balance sheet. Compute Kruse’s working capital. Compute Kruse’s current ratio. What does this ratio indicate about Kruse’s condition?

Question

Exercise 9-5: Several accounts that appeared on Kruse’s 2016 balance sheet are as follows:

Accounts payable                                $55,000     Equipment                                     $950,000

Marketable securities                            40,000     Taxes payable                                    15,000

Accounts receivable                            180,000     Retained earnings                            250,000  

Notes payable, 10%, due in 60 days     20,000     Inventory                                           85,000

Capital stock                                     1,150,000    Allowance for doubtful accounts       20,000

Salaries payable                                     10,000    Land                                                  600,000

Cash                                                       15,000

  1. Prepare the current liabilities section of Kruse’s 2016 balance sheet.
  2. Compute Kruse’s working capital.
  3. Compute Kruse’s current ratio. What does this ratio indicate about Kruse’s condition?

 

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