Assets Current assets Cash Accounts receivable Total current assets Fixed Assets 14,000 7,000 21,000 110.000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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**Applying for a Loan**

**Assets**

*Current Assets*

- Cash: $14,000
- Accounts Receivable: $7,000

*Total Current Assets*: $21,000

*Fixed Assets*

- Property, Plant & Equipment: $112,000
- Accumulated Depreciation: ($35,000)

*Net Fixed Assets*: $77,000

*Total Assets*: $98,000

---

**Liabilities and Owner's Equity**

*Current Liabilities*

- Accounts Payable: $2,500
- Note Payable: $26,500
- Deposits from Customers: $5,000

*Total Current Liabilities*: $34,000

*Total Liabilities*: $34,000

*Owner's Equity*

- Common Stock: $50,000
- Retained Earnings: $14,000

*Total Owner's Equity*: $64,000

*Total Liabilities and Equity*: $98,000

---

Use the balance sheet in the process of applying for a loan.  
**11. What is the amount of current assets and long-term assets that you have?**
Transcribed Image Text:**Applying for a Loan** **Assets** *Current Assets* - Cash: $14,000 - Accounts Receivable: $7,000 *Total Current Assets*: $21,000 *Fixed Assets* - Property, Plant & Equipment: $112,000 - Accumulated Depreciation: ($35,000) *Net Fixed Assets*: $77,000 *Total Assets*: $98,000 --- **Liabilities and Owner's Equity** *Current Liabilities* - Accounts Payable: $2,500 - Note Payable: $26,500 - Deposits from Customers: $5,000 *Total Current Liabilities*: $34,000 *Total Liabilities*: $34,000 *Owner's Equity* - Common Stock: $50,000 - Retained Earnings: $14,000 *Total Owner's Equity*: $64,000 *Total Liabilities and Equity*: $98,000 --- Use the balance sheet in the process of applying for a loan. **11. What is the amount of current assets and long-term assets that you have?**
**12. Calculate the current ratio. Using the rule of thumb given in the text, is this a good or bad ratio?**

*Hint: Current ratio = current assets / current liabilities*

By the rule of thumb, it should be 2 or greater. The current ratio is an indicator of a business's ability to repay debt when it is due.

**13. Why would the current ratio matter to your banker?**
Transcribed Image Text:**12. Calculate the current ratio. Using the rule of thumb given in the text, is this a good or bad ratio?** *Hint: Current ratio = current assets / current liabilities* By the rule of thumb, it should be 2 or greater. The current ratio is an indicator of a business's ability to repay debt when it is due. **13. Why would the current ratio matter to your banker?**
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