E2-15 (Algo) Analyzing the Effects of Transactions Using T-Accounts and Interpreting the Current Ratio as a Manager of the Company LO2-4, 2-5

Higgins Company began operations last year. You are a member of the management team investigating expansion ideas that will require borrowing funds from banks. On January 1, the start of the current year, Higgins T-account balances were as follows:

Assets:
Cash
7,400

Short-Term Investments
6,500

Property and Equipment
4,600

Liabilities:
Notes Payable (current)
	3,800

Notes Payable (noncurrect)
	2,400

Common Stock
	1,300

Additional Paid-in Capital
	5,600

Retained Earnings
	5,400

Required:

1. Using the data from these T-accounts, determine the amounts for the following on January 1 of the current year:

2. Prepare journal entries for transactions (a) through (e) for the current year.

1. Borrowed $8,000 from a local bank, signing a note due in three years.
2. Sold $5,500 of the investments for $5,500 cash.
3. Sold one-half of the property and equipment for $2,300 in cash.
4. Declared $2,400 in cash dividends to stockholders.
5. Paid dividends to stockholders.

3. Enter the effects of the transactions in 2. above in the T-accounts.

4. Prepare a trial balance at December 31.

5. Prepare a classified balance sheet at December 31 of the current year in good form.

6. Other stockholders' equity items Calculate the current ratio at December 31 of the current year. If the industry average for the current ratio is 1.34.