Financial Statement Presentation and Analysis Paperweights, Inc., is doing a thriving business and is about to declare an extra cash dividend at year-end as a result of its strong earnings report for the year. The balance sheet for Paperweights is as follows:

I. M. Gullable, president of Paperweights, Inc., is very proud of the 4.1 current ratio and reported net working capital of $235,000. He also is proud of the long-term debt to total asset ratio of only 53 percent. During the annual audit, the auditor has raised concerns about whether or not the financial statements are correctly prepared. For example, the auditor noted that Goodwill had been recorded to reflect the estimated value of increased business stemming from Mr. Gullable’s various charitable and civic activities and contributions. Assuming generally accepted accounting procedures are used:

a. What is the correct amount of working capital?

b. What is the correct amount of current assets and current liabilities? What is the correct current ratio?

c. What is the proper total of noncurrent assets? How does the total compare with the amount reported by the company?

d. Do the corrected amounts confirm Mr. Gullable’s analysis and assessment of the company’s safety? Explain.

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Cash Accounts receivable (net of accounts payable of $190,000) Inventory (at selling price) $ 25,000 130,000 160,000 Prepaid insurance Buildings and equipment Land Goodwill Total 20,000 350,000 40,000 225.000 $950,000