Question
1. The chief financial officer (CFO) of Carla Vista Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2022, so
1. The chief financial officer (CFO) of Carla Vista Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2022, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements with its creditors require the company to maintain a current ratio of at least 2:1. The preliminary balance sheet is as follows.
Carla Vista Corp. Balance Sheet December 30, 2022 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Current assets | Current liabilities | |||||||||
Cash | $27,000 | Accounts payable | $20,760 | |||||||
Accounts receivable | 31,800 | Salaries and wages payable | 11,800 | $32,560 | ||||||
Prepaid insurance | 6,800 | $65,600 | Long-term liabilities | |||||||
Equipment (net) | 200,060 | Notes payable | 81,800 | |||||||
Total assets | $265,660 | Total liabilities | 114,360 | |||||||
Stockholders equity | ||||||||||
Common stock | 100,000 | |||||||||
Retained earnings | 51,300 | 151,300 | ||||||||
Total liabilities and stockholders equity | $265,660 |
a. Calculate the current ratio and working capital based on the preliminary balance sheet. (Round current ratio to 2 decimal places, e.g. 0.50 : 1.)
b. Based on the results above, the CFO requested that $20,760 of cash be used to pay off the balance of the Accounts Payable account on December 31, 2022. Calculate the new current ratio and working capital after the company takes these actions. (Round current ratio to 2 decimal places, e.g. 0.50 : 1.)
Current ratio | enter current ratio rounded to 2 decimal places | :1 | |
---|---|---|---|
Working capital | $enter working capital in dollars |
2. Comparative financial statement data for Blossom Corporation and Pina Corporation, two competitors, appear below. All balance sheet data are as of December 31, 2022.
Blossom Corporation | Pina Corporation | |||
---|---|---|---|---|
2022 | 2022 | |||
Net sales | $2,232,000 | $768,800 | ||
Cost of goods sold | 1,457,000 | 421,600 | ||
Operating expenses | 350,920 | 121,520 | ||
Interest expense | 11,160 | 4,712 | ||
Income tax expense | 105,400 | 44,640 | ||
Current assets | 460,561 | 192,317 | ||
Plant assets (net) | 659,680 | 173,263 | ||
Current liabilities | 82,243 | 41,808 | ||
Long-term liabilities | 134,540 | 50,448 |
(a)
Compute working capital and the current ratios for each company for 2022. (Round current ratio to 1 decimal place, e.g. 0.7 : 1.)
Working Capital | Current Ratio | ||||
---|---|---|---|---|---|
Blossom Corporation | $enter working capital in dollars | enter current ratio rounded to 1 decimal place | :1 | ||
Pina Corporation | $enter working capital in dollars | enter current ratio rounded to 1 decimal place | :1 |
3. Listed below are assets and liabilities of Oriole Corporation for the years 2021 and 2022. Each is listed in alphabetical order.
Assets | 2022 | 2021 | Liabilities | 2022 | 2021 | |||||
---|---|---|---|---|---|---|---|---|---|---|
Accounts receivable | $2,200 | $2,900 | Accounts payable | $4,400 | $3,500 | |||||
Cash | 1,400 | 1,728 | Bonds payable | 31,500 | 26,500 | |||||
Equipment (net) | 46,500 | 52,500 | Notes payable (current) | 2,700 | 2,100 | |||||
Inventory | 4,200 | 4,700 | Notes payable (long-term) | 5,500 | 4,500 | |||||
Land | 24,500 | 24,500 | ||||||||
Supplies | 933 | 1,200 | ||||||||
Total assets | $79,733 | $87,528 | Total liabilities | $44,100 | $36,600 |
Oriole reported net income of $50,500 for 2022 and $44,500 for 2021.
a. Compute total current assets and total current liabilities for each year.
b. Compute working capital and the current ratio for each year. (Round current ratio to 2 decimal places, e.g. 52.75.)
2022 | 2021 | |||||
---|---|---|---|---|---|---|
Working capital | $enter working capital in dollars | $enter working capital in dollars | ||||
Current ratio | enter current ratio rounded to 2 decimal places | : 1 | enter current ratio rounded to 2 decimal places | : 1 |
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