BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

Solutions

Chapter
Section
BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
573 views

Exercise 1-38 Identifying Current Assets and Liabilities

Dunn Sporting Goods sells athletic clothing and footwear 10 retail customers. Dunn’s accountant indicates that the firm’s operating cycle averages 6 months. At December 31, 2019, Dunn has the following assets and liabilities:

  1. Prepaid rent in the amount of 58,500. Dunn’s rent is $500 per month.
  2. A $9,700 account payable due in 45 days.
  3. Inventory in the amount of $46,230. Dunn expects to sell $38,000 of the inventory within 3 months. The remainder will be placed in storage until September 2020. The items placed in storage should be sold by November 2020.
  4. An investment in marketable securities in the amount of $1,900. Dunn expects to sell $700 of the marketable securities in 6 months. The remainder are not expected to be sold until 2022.
  5. Cash in the amount of $1,050.
  6. An equipment loan in the amount of $60,000 due in March 2024. Interest of $4,500 is due in March 2020 ($3,750 of the interest relates to 2019. with the remainder relating to the first 3 months of 2020).
  7. An account receivable from a local university in the amount of $2,850. The university has promised to pay the full amount in 3 months.
  8. Store equipment at a cost of $9,200. Accumulated depreciation has been recorded on the store equipment in the amount of 51,250.

Required:

  1. Prepare the current asset and current liability portions of Dunn’s December 31, 20191 balance-sheet.
  2. Compute Dunn’s working capital and current ratio at December 31, 2019.
  3. CONCEPTUAL CONNECTION As in investor or creditor. what do these ratios tell you about Dunn’s liquidity?

To determine

Concept Introduction:

Balance Sheet: The Balance sheet is a summary of Assets, Liabilities and equity accounts that reports the financial position of the business as on a specific date. Assets are further classifies into Current Assets, Long Term Investments, Plant Assets and Intangible assets. And Liabilities are further classified into Current Liabilities and Long term liabilities.

Income Statement:

Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.

Requirement-1:

To Prepare:

The Current assets and Current Liabilities section of the balance sheet.

Explanation

Balance sheet is a summary of Assets, Liabilities and equity accounts that reports the financial position of the business as on a specific date. Assets are further classifies into Current Assets, Long Term Investments, Plant Assets and Intangible assets. And Liabilities are further classified into Current Liabilities and Long term liabilities. The Current assets and Current Liabilities section of the balance sheet is prepared as follows:

    Dunn Sporting Goods
    Current Assets:
    Cash $ 1,050
    Prepaid Rent $ 8,500
    ...
To determine

Concept Introduction:

Balance Sheet: The Balance sheet is a summary of Assets, Liabilities and equity accounts that reports the financial position of the business as on a specific date. Assets are further classifies into Current Assets, Long Term Investments, Plant Assets and Intangible assets. And Liabilities are further classified into Current Liabilities and Long term liabilities.

Income Statement:

Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.

Requirement-2:

To Calculate:

The working capital and current ration as on Dec. 31, 2019.

To determine

Concept Introduction:

Balance Sheet: The Balance sheet is a summary of Assets, Liabilities and equity accounts that reports the financial position of the business as on a specific date. Assets are further classifies into Current Assets, Long Term Investments, Plant Assets and Intangible assets. And Liabilities are further classified into Current Liabilities and Long term liabilities.

Income Statement:

Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.

Requirement-3:

To Discuss:

The liquidity of the company.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Explain why product extension and refinement are important.

Foundations of Business (MindTap Course List)

What is sparse data? Give an example.

Database Systems: Design, Implementation, & Management

Describe the Big Data phenomenon.

Database Systems: Design, Implementation, & Management

You are to write down on a piece of paper how much (to the nearest penny) money you have on you. Your instructo...

Engineering Fundamentals: An Introduction to Engineering (MindTap Course List)

List some common uses ot the dial indicator.

Automotive Technology: A Systems Approach (MindTap Course List)

Define the terms query language, SQL, and QBE.

Enhanced Discovering Computers 2017 (Shelly Cashman Series) (MindTap Course List)

How many bits does an IPv6 address contain?

Network+ Guide to Networks (MindTap Course List)