
Concept explainers
Analyzing the Effects of Transactions Using T-Accounts and Interpreting the
Higgins Company began operations last year. You are a member of the management team investigating expansion ideas that will require borrowing funds from banks. At the start of the current year. Higgins’s T-account balances were as follows:
Assets:
Cash | |
5,000 |
Liabilities:
Short-Term Investments |
2,500 |
Property and Equipment |
3,000 |
Short-Term Notes Payable 2,200 |
Stockholders ' Equity:
Long-Term Notes Payable 1,800 |
Common Stock | |
1 | 500 |
Additional Paid-in Capital |
4,000 |
3,000 |
Required:
1. Using the data from these T-accounts, determine the amounts for the following on January 1 of the current year
Assets $ ____ = Liabilities $__+ Stockholders’ Equity $__
2. Enter the following transactions for the current year in the T-accounts:
- (a) Borrowed $4,000 from a local bank, signing a note due in three years.
- (b) Sold $1,500 of the investments for $1,500 cash.
- (c) Sold one-half of the property and equipment for $1,500 in cash.
- (d) Declared and paid $,800 in cash dividends to stockholders.
3. Compute ending balances in the T-accounts to determine amounts for the following on December 31 of the current year
Assets $ _____ = Liabilities $ _____ + Stockholders’ Equity $ _____
4. Calculate the current ratio at December 31 of the current year. If the industry average for the current ratio is 1.50. What does your computation suggest to you about Higgins Company? Would you suggest that Higgins Company increase its short-term liabilities? Why or why not?

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Chapter 2 Solutions
FINANCIAL ACCOUNTING 9TH
- Can you help me solve this general accounting question using the correct accounting procedures?arrow_forwardQuestion 1181 28 Current Attempt in Progress Here are comparative balance sheets for Migitsu Company. Prepare a statement of cash flows-indirect method. MIGITSU COMPANY Comparative Balance Sheets December 31 Assets 2020 2019 Cash $73,000 $22,000 Accounts receivable 87,000 76.000 Inventory 170,000 191.000 Land 72,000 100.000 Equipment 260,000 200.000 Accumulated depreciation - equipment (66,000) (32.000) Total $596,000 $557,000 Liabilities and Stockholders' Equity Accounts payable $37,000 $47.000 Bonds payable 150,000 210,000 Common stock ($1 par) 216.000 174,000 Retained earnings 193,000 126.000 Total $596,000 $557,000 Additional information: 1 Net income for 2020 was $100,000. N Cash dividends of $33,000 were declared and paid. 3. Bonds payable amounting to $60,000 were redeemed for cash $60,000. -18 4. Common stock was issued for $42,000 cash. 5. Equipment that cost $50,000 and had a book value of $30,000 was sold for $36,000 during 2020; land was sold at cost.arrow_forwardI need guidance with this general accounting problem using the right accounting principles.arrow_forward
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