Chapter 4, Problem 4.18E

1.

To determine

Balance Sheet: A Balance Sheet is a statement showing the position of the assets, liabilities and the owner’s equity at the end of the financial year.

Income Statement: Income Statement is a financial statement that is prepared by all the companies by enumerating all the expenses and revenues to calculate the resulting difference of Net Profit or Net Loss.

Retained Earnings Statement: Retained Earnings Statement is the statement showing the balance of retained earnings left at the end of the period after including the net profit for the period and distributing the dividend to the shareholders.

Current Ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1

Formula:

$\text{Current ratio}=\frac{\text{Current assets}}{\text{Current}\text{liabilities}}$

To prepare: a classified balance sheet.

2.

To determine

To calculate: Current ratio for Company MDS at August 31, 2018.