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Cornerstones of Financial Accounti...

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Exercise 1-42 Classified Balance Sheet

College Spirit sells sportswear with logos of major universities. At the end of 2019, the following balance sheet account balances were available.

Chapter 1, Problem 42E, Exercise 1-42 Classified Balance Sheet College Spirit sells sportswear with logos of major

Required:

1. Prepare a classified balance sheet for College Spirit at December 31, 2019.

2. Compute College Spirits working capital and current ratio at December 31, 2.019.

3. CONCEPTUAL CONNECTION Comment on College Spirit’s liquidity as of December 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-1:

To Prepare:

The classified balance sheet for College Spirit at Dec. 31, 2019.

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 classified balance sheet for College Spirit at Dec. 31, 2019 is prepared as follows;

    College Spirit
    Balance Sheet
    As on Dec. 31, 2019
    ASSETS
    Current Assets:
    Cash $ 13,300
    Accounts Receivables $ 6,700
    Prepaid Rent $ 54,000
    Inventory $ 481,400 $ 555,400
    Long Term Investment $ 110,900
    Property, Plant and Equipment:
    Furniture $ 88,000
    Less: Accumulated depreciation $ (23,700) $ 64,300
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 ratio for the company.

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.

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