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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Exercise 1-39 Current Assets and Current Liabilities

Hanson Construction has an operating cycle of '5' months. On December 31. 2019, Hanson has the following assets and liabilities:

  1. A note receivable in the amount of $1500 10 be collected in 6 months
  2. Cash totaling $1,380
  3. Accounts payable totaling $2,100, all of which will be paid within 2 months
  4. Accounts receivable totaling $12,000, including an account for $7,000 that will be paid in 2 months and an account for $5,000 that will be paid in 18 months
  5. Construction supplies coming $6,200, all of which will be used in construction within the next 12 months
  6. Construction equipment costing $60,000 on which depreciation of $22,400 has accumulated
  7. A note payable to the bank in the amount of $6,800 is to be paid within the next year

Required:

  1. Calculate the amounts of current assets and current liabilities reported on Hanson’s balance sheet at December 31, 2019.
  2. CONCEPTUAL CONNECTION Comment on Hanson’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.

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:

    Hanson Construction
    Current Assets:
    Cash $ 1,380
    Accounts Receivable $ 7,000
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 Discuss:

The liquidity of the company.

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