Given the book values of the inventory items of a Farm A as of 31 December 2018: ITEM VALUE (P) 1 Accounts Payable 5,000 2 Machines and equipment 15,000 3 Cash-on-hand 1,500 4 Merchandise inventories 12,400 5 Remaining balance on long-term debt 8,700 6 Buildings and improvements 20,000 7 Current portion of long-term debt 1,700 8 Accrued interest payable 1,400 9 Accounts receivable 6,200 10 Mortgage payable 14,500 11 Land 50,000 12 Prepaid expenses 700 1. Construct the balance sheet of Farm A as of 31 December 2018. 2. Compute for and interpret the following: a. Current ratio b. Working capital c. Acid-test ratio
Given the book values of the inventory items of a Farm A as of 31 December 2018: ITEM VALUE (P) 1 Accounts Payable 5,000 2 Machines and equipment 15,000 3 Cash-on-hand 1,500 4 Merchandise inventories 12,400 5 Remaining balance on long-term debt 8,700 6 Buildings and improvements 20,000 7 Current portion of long-term debt 1,700 8 Accrued interest payable 1,400 9 Accounts receivable 6,200 10 Mortgage payable 14,500 11 Land 50,000 12 Prepaid expenses 700 1. Construct the balance sheet of Farm A as of 31 December 2018. 2. Compute for and interpret the following: a. Current ratio b. Working capital c. Acid-test ratio
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Given the book values of the inventory items of a Farm A as of 31 December 2018:
| ITEM | VALUE (P) | |
| 1 | Accounts Payable | 5,000 |
| 2 | Machines and equipment | 15,000 |
| 3 | Cash-on-hand | 1,500 |
| 4 | Merchandise inventories | 12,400 |
| 5 | Remaining balance on long-term debt | 8,700 |
| 6 | Buildings and improvements | 20,000 |
| 7 | Current portion of long-term debt | 1,700 |
| 8 | Accrued interest payable | 1,400 |
| 9 | 6,200 | |
| 10 | Mortgage payable | 14,500 |
| 11 | Land | 50,000 |
| 12 | Prepaid expenses | 700 |
1. Construct the
2. Compute for and interpret the following:
a.
b.
c. Acid-test ratio
d. Net capital ratio
e. Networth ratio
f. Debt/Asset ratio
g. Debt/Equity ratio
3. What can you say about the short-run and long-run financial conditions of Farm A?
4. What do you think is the main limitation of the given information? Can you effectively analyze both the short-run and long-run positions of Farm A? Why or why not?
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