Consider these transactions:

1. Investors purchased $900,000 of common stock from the firm.

2. The firm purchased land, buildings, and equipment valued at $1,300,000;

paid $300,000 in cash; and signed a mortgage for the balance due.

3. Paid rent of $10,000 for five automobiles.

4. The auto rental covers two months, one of which is the current month.

5. Purchased supplies on account for $55,000.

6. Provided services on account to customers at a retail value of $3,200,000.

7. Collected $3,000,000 from customers on account.

8. Paid its supplies.

9. Recorded monthly depreciation of $22,000.

10. Accrued one month’s (mortgage) interest at 12% per annum.

Required

a. Arrange columns in a spreadsheet, corresponding to the balance sheet equation using these balance sheet accounts: Cash, Accounts Receivable, Prepaid Rent, Supplies, Property Plant and Equipment, Accumulated Depreciation, Accounts Payable, Interest Payable, Mortgage Payable, Common Stock, Retained Earnings. Enter transactions 1 through 10 into the columns. Total each column and verify that the balance sheet equation does indeed balance.

b. Prepare a classified balance sheet, using the column totals from your spreadsheet.

c. Analyze the firm’s liquidity, using the ratios from this chapter.

d. Evaluate the firm’s asset management and debt management. Provide an overall performance assessment.

e. What important information is missing that would further assist in evaluating these results? Even though the firm’s performance seems spectacularly good, could the missing information change your opinion? Why?