Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You have a friend who has been in business for five years. The business has been doing very well. Your friend has every reason to

You have a friend who has been in business for five years. The business has been doing very well. Your friend has every reason to believe that the business will continue to grow and be financially prosperous. Your friend has learned that you have some knowledge about accounting, and has started a conversation with you about the business. Your friend says, I heard that there are some financial statements that I should be maintaining. Then, the friend begins to ask you some questions.

  1. Which financial statement will tell me if I make a profit or incurred a loss?

Answer: ______________________________________________________________

  1. Which financial statement will tell me if I made a profit in a particular month?

Answer: ______________________________________________________________

  1. When I get ready to apply for a bank loan, how can I show the bank how much my company is worth?

Answer: ______________________________________________________________

  1. Over the years, I invested more than $20,000 in my business. What financial statement shows my investment in my business?

Answer: ______________________________________________________________

  1. The Balance Sheet for the company shows assets totaling $107,000 and liabilities totaling $75,000. Which of the following statements is correct? A. Owner's Equity equals $182,000. B. Current Assets are worth $32,000. C. Net Income for the period is $32,000. D. Owner's Equity equals $32,000.

The following questions are not associated with the scenario.

6. Bark Three Times Pet Store's accountant has recorded the following: Total current assets = $60,000, including cash = $24,000; Accounts Receivable = $20,000; and, Inventory = $16,000. Total assets = $230,000; Total current liabilities = $48,000; and, Total current and long-term liabilities = $98,000.

Are the following two statements true or false? Show the math you used to determine the answer.

The store's current ratio = 1.25. The store's acid-test ratio = .92

7. As a bank loan officer, you are considering a loan application by Peak Performance Sporting Goods. The company has provided you with the following information from its Balance Sheet. Cash $ 25,000 Accounts Receivable 45,000 Inventory 140,000 Fixed Assets 190,000 Current Liabilities 70,000 Long-term Liabilities 90,000 You determine Peak Performance's current ratio is: A. 1.0. B. 1.5%. C. 2.5%. D. 3.0%.

Show the math you used to determine the answer.

*************************

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Agile Governance And Audit An Overview For Auditors And Agile Teams

Authors: Christopher Wright

1st Edition

184928587X, 978-1849285872

More Books

Students also viewed these Accounting questions