Question 2: Balance Sheet Build and Analysis (20 Marks)

Q.Clean, a student run dry-cleaning service has the following financial information as of December 31, 2020:

• The cash ending balance for the year was $117,820

• Buildings & Equipment for the year was $91,350

• Accounts Receivables for the year was $31,510

• Common Shares for the year was $194,860

• Inventory for the year was $87,970

• Land for the year for the year was $281,490

• Accounts Payable for the year was $74,250

• Retained earnings for the year was $70,100

• Buildings & Equipment Accumulated Depreciation for the year was $40,000

• Wages payable for the year was $46,190

• Short-term debt for the year was $10,500

• Taxes payable for the year was $55,750

• Mortgage for the year was $60,010

• 10-year bond for the year was $20,500

• Interest Payable for the year was $37,980

1. Prepare a 2020 Balance Sheet for the company. Ensure you categorize your accounts into Current and Non-Current Assets/Liabilities, and Shareholders Equity. (8 marks)

2. Calculate the Net Working Capital and Quick Ratio of the company. Explain what these values are and what they are used for. Comment on the companys financial position, based on the ratios you calculated. (6 marks)

3. In 2021, the company plans to purchase additional retail space in Ray Hall. This space will cost $100,000. Half of the purchase will be made in cash, and the other half will be added to the mortgage. Also, the company takes an additional $35,000 of short-term debt. Please answer the following questions:

1. Describe the effect that these transactions will have on the 2020 Balance Sheet. (4 marks)

2. Will this impact the Income Statement in any way? If yes, identify and explain the impact. If no, explain why there is no impact. (2 marks)