Question
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.
- Which financial statement will tell me if I make a profit or incurred a loss?
Answer: ______________________________________________________________
- Which financial statement will tell me if I made a profit in a particular month?
Answer: ______________________________________________________________
- When I get ready to apply for a bank loan, how can I show the bank how much my company is worth?
Answer: ______________________________________________________________
- Over the years, I invested more than $20,000 in my business. What financial statement shows my investment in my business?
Answer: ______________________________________________________________
- 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.
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