ASSIGNMENT NO.1

FIN ACCOUNTING 1198

Due Week 5

PROBLEM-1- The following accounts are taken from the financial statements of Facebook Inc. at September 30, 2013. (Amounts are in millions.)

Accounts Payable $ 700

Cash $3,100

Common Stock $10,400

Equipment $2,700

Income Tax Expense $300

Interest Expense $50

Notes Payable (long-term) $900

Notes Payable (short-term) $300

Prepaid Rent $1,100

Retained Earnings $2,600

Service Revenue $5,300

Short-term Investments $6,300

Software $1,700

REQUIRED:

1 . Prepare a classified balance sheet at September 30, 2013.

TIP: This exercise requires you to remember material from Chapter 1. (Some of the above accounts are not reported on the balance sheet.)

1. Using the balance sheet, indicate whether the total assets of Facebook Inc. at the end of the year were financed primarily by liabilities or stockholders equity.
2. Were the current assets sufficient to cover the current liabilities at September 30, 2013? Show the ratio and calculations that indicate this.

PROBLEM-2.1- Calculating and Interpreting the Current Ratio

The balance sheet of Mister Ribs Restaurant reports current assets of $30,000 and current liabilities of $15,000. Calculate and interpret the current ratio. Does it appear likely that Mister Ribs will be able to pay its current liabilities as they come due in the next year?

PROBLEM2.2 - Evaluating the Impact of Transactions on the Current Ratio

Refer to 2.1 above and Evaluate whether the current ratio of Mister Ribs Restaurant will increase or decrease as a result of the following transactions. Consider each item, ( a )-( d ), independent of the others.

a . Paid $2,000 cash for a new oven.

b . Received a $2,000 cash contribution from an investor for the companys common stock.

1. Borrowed $5,000 cash from a bank, issuing a note that must be repaid in three years.
2. Purchased $500 of napkins, paper cups, and other disposable supplies on account.