Assets Liabilities and Equity $ (15,000) Accounts receivable (net) 7% Note payable .... Common stock at par...... Contributed capital in excess of par.. Retained earnings $ 320,000 1,500,000 550,000 Cash .... Accounts payable Inventory ... Plant and equipment (net) 500,000 150,000 1,560,000 550,000 (300,000) (240,000) $2,380,000 Goodwill.... 150,000 ... Other assets.. 35,000 2015 Net income Total assets $2,380,000 Total liabilities and equity ... .....
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Marshall Tool and Die Company has been experiencing significant foreign competition and a declining market. Annual net losses from operations have averaged $250,000 over the last three years. The company’s
After analyzing
In response to the current situation, the company has decided to take the following actions:
a. Record the suggested impairment in all assets.
b. Restructure the note receivable from the officers to reflect four annual payments and an interest rate of 7.5%.
c. Restructure the note payable, which was due in 2017, to provide for 12 semiannual payments of $120,000 including interest at the annual rate of 6%.
d. Engage in a quasi-reorganization to eliminate the deficit in
1. Prepare a revised classified balance sheet to reflect the effect of management’s actions.
2. Compute the following ratios before and after management’s actions:
3. Given the above ratio analysis, if the ratios do not suggest an improvement, discuss the benefits of management’s actions.
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