Chapter 1, Problem 43E

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 Jerrsion Company at Dec. 31, 2019.

Answer to Problem 43E

The classified balance sheet for Jerrsion Company at Dec. 31, 2019 is as follows:

Jerrsion Company
Balance Sheet
As on Dec. 31, 2019
ASSETS
Current Assets:
Cash	$ 11,400
Accounts Receivables	$ 95,500
Short Term Investment	$ 21,000
Prepaid Insurance	$ 5,700
Inventory	$ 187,900	$ 321,500
Long Term Investment		$ 32,700
Property, Plant and Equipment:
Land		$ 41,000
Equipment	$ 309,000
Less: Accumulated depreciation	$(172,400)	$ 136,600
Trucks	$ 106,100
Less: Accumulated depreciation	$ (31,200)	$ 74,900
Building	$ 419,900
Less: Accumulated depreciation	$(216,800)	$ 203,100
Total Assets		$ 809,800
LIABILITIES AND EQUITY
LIABILITIES
Current Liabilities:
Income Taxes Payable	$ 21,600
Interest Payable	$ 12,600
Accounts Payable	$ 65,100
Salaries Payable	$ 14,400
Notes Payable	$ 150,000
		$ 263,700
Long Term Liabilities:
Bonds Payable		$ 200,000
Equity:
Common Stock	$ 150,000
Retained earnings	$ 196,100	$ 346,100
Total Liabilities and Equity		$ 809,800

Explanation of Solution

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 Jerrsion Company at Dec. 31, 2019 is as follows:

Jerrsion Company
Balance Sheet
As on Dec. 31, 2019
ASSETS
Current Assets:
Cash	$ 11,400
Accounts Receivables	$ 95,500
Short Term Investment	$ 21,000
Prepaid Insurance	$ 5,700
Inventory	$ 187,900	$ 321,500
Long Term Investment		$ 32,700
Property, Plant and Equipment:
Land		$ 41,000
Equipment	$ 309,000
Less: Accumulated depreciation	$(172,400)	$ 136,600
Trucks	$ 106,100
Less: Accumulated depreciation	$ (31,200)	$ 74,900
Building	$ 419,900
Less: Accumulated depreciation	$(216,800)	$ 203,100
Total Assets		$ 809,800
LIABILITIES AND EQUITY
LIABILITIES
Current Liabilities:
Income Taxes Payable	$ 21,600
Interest Payable	$ 12,600
Accounts Payable	$ 65,100
Salaries Payable	$ 14,400
Notes Payable	$ 150,000
		$ 263,700
Long Term Liabilities:
Bonds Payable		$ 200,000
Equity:
Common Stock	$ 150,000
Retained earnings	$ 196,100	$ 346,100
Total Liabilities and Equity		$ 809,800

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 ration as on Dec. 31, 2019.

Answer to Problem 43E

The working capital and current ration as on Dec. 31, 2019 is as follows:

Working Capital		$ 57,800
Current Ratio		1.22

Explanation of Solution

The working capital and current ration as on Dec. 31, 2019 is calculated as follows:

Current Assets:
Cash	$ 11,400
Accounts Receivables	$ 95,500
Short Term Investment	$ 21,000
Prepaid Insurance	$ 5,700
Inventory	$ 187,900
Total Current Assets (A)		$ 321,500
Current Liabilities:
Income Taxes Payable	$ 21,600
Interest Payable	$ 12,600
Accounts Payable	$ 65,100
Salaries Payable	$ 14,400
Notes Payable	$ 150,000
Total Current Liabilities (B)		$ 263,700
Working Capital (A-B)		$ 57,800
Current Ratio (A/B)		1.22

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.

Answer to Problem 43E

The firm is less liquid because its current ratio is lower than 2.

Explanation of Solution

The working capital and current ration as on Dec. 31, 2019 is calculated as follows:

Current Assets:
Cash	$ 11,400
Accounts Receivables	$ 95,500
Short Term Investment	$ 21,000
Prepaid Insurance	$ 5,700
Inventory	$ 187,900
Total Current Assets (A)		$ 321,500
Current Liabilities:
Income Taxes Payable	$ 21,600
Interest Payable	$ 12,600
Accounts Payable	$ 65,100
Salaries Payable	$ 14,400
Notes Payable	$ 150,000
Total Current Liabilities (B)		$ 263,700
Working Capital (A-B)		$ 57,800
Current Ratio (A/B)		1.22

The firm is less liquid because its current ratio is lower than 2.