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Balance Sheet Assets Cash Accounts Receivable Inventory Prepaid Expenses 2020 Income Statement 2020 Sales $ 530,000 $ 280,000 Cost of Goods Sold 148,400 117,600 Gross Profit $ 381,600 89,600 Interest Income 53,000 14,000 Total Income 434,600 Total Current Assets $ 501,200 Sales Salaries 121,900 Fixed Assets 33,600 26,500 Office Salaries Total Assets $ 534,800 Office Equipment Rental 37,100 Liabilities & Equity Interest Expense 15,900 Accounts Payable $ 90,916 General & Administrative 4,770 Notes Payable 48,132 Total Expenses 206,170 Accrued Expenses 42,784 Income Before Tax 228,430 Taxes Payable 37,436 Income Taxes 132,500 Deferred Taxes 48,132 Net Income $4 95,930 Total Current Liabilities $ 267,400 Long-Term Notes 123,004 $ 390,404 Total Liabilities Capital Stock Retained Earnings 53,480 90,916 $ 144,396 $ 534,800 Total Equity Total Liabilities & Equity

Balance Sheet Assets Cash Accounts Receivable Inventory Prepaid Expenses 2020 Income Statement 2020 Sales $ 530,000 $ 280,000 Cost of Goods Sold 148,400 117,600 Gross Profit $ 381,600 89,600 Interest Income 53,000 14,000 Total Income 434,600 Total Current Assets $ 501,200 Sales Salaries 121,900 Fixed Assets 33,600 26,500 Office Salaries Total Assets $ 534,800 Office Equipment Rental 37,100 Liabilities & Equity Interest Expense 15,900 Accounts Payable $ 90,916 General & Administrative 4,770 Notes Payable 48,132 Total Expenses 206,170 Accrued Expenses 42,784 Income Before Tax 228,430 Taxes Payable 37,436 Income Taxes 132,500 Deferred Taxes 48,132 Net Income $4 95,930 Total Current Liabilities $ 267,400 Long-Term Notes 123,004 $ 390,404 Total Liabilities Capital Stock Retained Earnings 53,480 90,916 $ 144,396 $ 534,800 Total Equity Total Liabilities & Equity

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Using Financial Statements for 2020, current ratio for the year 2020 is 1.62.

### Financial Statements Overview #### Balance Sheet (2020) **Assets** - **Current Assets:** - Cash: $280,000 - Accounts Receivable: $117,600 - Inventory: $89,600 - Prepaid Expenses: $14,000 - **Total Current Assets:** $501,200 - **Fixed Assets:** $33,600 - **Total Assets:** $534,800 **Liabilities & Equity** - **Current Liabilities:** - Accounts Payable: $90,916 - Notes Payable: $48,132 - Accrued Expenses: $42,784 - Taxes Payable: $37,436 - Deferred Taxes: $48,132 - **Total Current Liabilities:** $267,400 - **Long-Term Liabilities:** - Long-Term Notes: $123,004 - **Total Liabilities:** $390,404 - **Equity:** - Capital Stock: $53,480 - Retained Earnings: $90,916 - **Total Equity:** $144,396 - **Total Liabilities & Equity:** $534,800 #### Income Statement (2020) - **Sales:** $530,000 - **Cost of Goods Sold:** $148,400 - **Gross Profit:** $381,600 - **Interest Income:** $53,200 - **Total Income:** $434,800 **Expenses:** - Sales Salaries: $121,900 - Office Salaries: $26,500 - Office Equipment Rental: $37,100 - Interest Expense: $15,900 - General & Administrative: $4,770 - **Total Expenses:** $206,170 - **Income Before Tax:** $228,430 - **Income Taxes:** $132,500 - **Net Income:** $95,930 ### Analysis The Balance Sheet provides a snapshot of the company's financial position, detailing its assets, liabilities, and equity. It shows the company's ability to meet its obligations with its current and long-term assets and liabilities. The Income Statement summarizes the company's performance over the year, highlighting the revenue, costs, and profits. The gross profit indicates efficiency in managing production costs, while the net income reflects the company's overall profitability after expenses and taxes.
Transcribed Image Text:### Financial Statements Overview #### Balance Sheet (2020) **Assets** - **Current Assets:** - Cash: $280,000 - Accounts Receivable: $117,600 - Inventory: $89,600 - Prepaid Expenses: $14,000 - **Total Current Assets:** $501,200 - **Fixed Assets:** $33,600 - **Total Assets:** $534,800 **Liabilities & Equity** - **Current Liabilities:** - Accounts Payable: $90,916 - Notes Payable: $48,132 - Accrued Expenses: $42,784 - Taxes Payable: $37,436 - Deferred Taxes: $48,132 - **Total Current Liabilities:** $267,400 - **Long-Term Liabilities:** - Long-Term Notes: $123,004 - **Total Liabilities:** $390,404 - **Equity:** - Capital Stock: $53,480 - Retained Earnings: $90,916 - **Total Equity:** $144,396 - **Total Liabilities & Equity:** $534,800 #### Income Statement (2020) - **Sales:** $530,000 - **Cost of Goods Sold:** $148,400 - **Gross Profit:** $381,600 - **Interest Income:** $53,200 - **Total Income:** $434,800 **Expenses:** - Sales Salaries: $121,900 - Office Salaries: $26,500 - Office Equipment Rental: $37,100 - Interest Expense: $15,900 - General & Administrative: $4,770 - **Total Expenses:** $206,170 - **Income Before Tax:** $228,430 - **Income Taxes:** $132,500 - **Net Income:** $95,930 ### Analysis The Balance Sheet provides a snapshot of the company's financial position, detailing its assets, liabilities, and equity. It shows the company's ability to meet its obligations with its current and long-term assets and liabilities. The Income Statement summarizes the company's performance over the year, highlighting the revenue, costs, and profits. The gross profit indicates efficiency in managing production costs, while the net income reflects the company's overall profitability after expenses and taxes.
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Step 1

 

current ratio reflect the firms ability to manage its short term obligations using the current asset

current ratio formula:

current ratio =current asset current liabilites

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