Question
Use Worksheet 2.1 . Sadie Richardsons banker has asked her to submit a personal balance sheet as of June 30, 2020, in support of an
Use Worksheet 2.1. Sadie Richardsons banker has asked her to submit a personal balance sheet as of June 30, 2020, in support of an application for a $3,000 home improvement loan. She comes to you for help in preparing it. So far, she has made the following list of her assets and liabilities as of June 30, 2020:
| Cash on hand | $ 70 | |
| Balance in checking account | 180 | |
| Balance in money market deposit account with | ||
| Southwest Savings | 700 | |
| Bills outstanding: | ||
| Telephone | $ 20 | |
| Electricity | 70 | |
| Charge account balance | 190 | |
| Visa | 180 | |
| MasterCard | 220 | |
| Taxes | 400 | |
| Insurance | 220 | 1,300 |
| Condo and property | 70,000 | |
| Condo mortgage loan | 50,000 | |
| Automobile: 2015 Honda Civic | 12,000 | |
| Installment loan balances: | ||
| Auto loans | 3,000 | |
| Furniture loan | 500 | 3,500 |
| Personal property: | ||
| Furniture | 1,050 | |
| Clothing | 900 | 1,950 |
| Investments: | ||
| U.S. government savings bonds | 500 | |
| Stock of Commodities Corp. | 3,000 | 3,500 |
From the data given, prepare Sadie Richardsons balance sheet, dated June 30, 2020 (follow the balance sheet form shown in Worksheet 2.1). Then evaluate her balance sheet relative to the following factors: (a) solvency, (b) liquidity, and (c) equity in her dominant asset.
| Balance Sheet | |||||||
| Name(s): Sadie Richardson | Date: 30-Jun-2020 | ||||||
| ASSETS | LIABILITIES | ||||||
| Liquid Assets | Current Liabilities | ||||||
| Cash on hand | $ | Utilities | $ | ||||
| In checking | Rent | ||||||
| Savings accounts | Insurance premiums | ||||||
| Money market funds and deposits | Taxes | ||||||
| Medical/dental bills | |||||||
| Certificates of deposit (<1 yr. to matutity) | Repair bills | ||||||
| Total Liquid Assets | $ | Bank credit card balances | |||||
| Investments | Department store credit card balances | ||||||
| Stocks | Travel and entertainment card balances | ||||||
| Bonds | Gas and other credit balances | ||||||
| Certificates of deposit (>1 yr. to maturity) | Bank line of credit balances | ||||||
| Mutual funds | Other current liabilities | ||||||
| Real estate | Total Current Liabilities | $ | |||||
| Retirement funds, IRA | Long-Term Liabilities | ||||||
| Other | Primary residence mortgage | $ | |||||
| Total Investments | $ | Real estate investment | |||||
| Real Property | mortgage | ||||||
| Primary residence | $ | Auto loans | |||||
| Second home | Appliance/furniture loans | ||||||
| Other | Home improvement loans | ||||||
| Total Real Property | $ | Single-payment loans | |||||
| Personal Property | Education loans | ||||||
| Autos | $ | Margin loans used to purchase securities | |||||
| Other long-term loans | |||||||
| Recreational vehicles | |||||||
| Household furnishings | Total Long-Term Liabilities | $ | |||||
| Jewelry and artwork | |||||||
| Other | Total Liabilities | $ | |||||
| Other | |||||||
| Total Personal Property | $ | Net Worth | $ | ||||
| Total Assets | $ | Total Liabilities and Net Worth | $ | ||||
- Solvency ratio. Enter your answer as a percentage rounded to two decimal places. %
- Liquidity ratio. Enter your answer as a percentage rounded to two decimal places. %
- Equity in her dominant asset. Enter your answer as a percentage rounded to two decimal places. %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Fundamentals of corporate finance
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
10th edition
978-1260013955, 78034639, 978-0078034633
