Question

Cougar Plastics Company has been operating for three years. At December 31, 2014, the accounting records reflected the following:

Cash	$	22,000		Accounts payable	$	20,000
Investments (short-term)		2,600		Accrued liabilities payable		2,800
Accounts receivable		3,700		Notes payable (short-term)		6,800
Inventory		28,000		Notes payable (long-term)		42,000
Notes receivable (long-term)		2,700		Common stock		10,500
Equipment		47,000		Additional paid-in capital		94,500
Factory building		95,000		Retained earnings		28,500
Intangibles		4,100

During the year 2015, the company had the following summarized activities:

a.	Purchased short-term investments for $8,800 cash.
b.	Lent $5,300 to a supplier who signed a two-year note.
c.	Purchased equipment that cost $20,000; paid $5,200 cash and signed a one-year note for the balance.
d.	Hired a new president at the end of the year. The contract was for $79,000 per year plus options to purchase company stock at a set price based on company performance.
e.	Issued an additional 2,200 shares of $0.50 par value common stock for $18,000 cash.
f.	Borrowed $17,000 cash from a local bank, payable in three months.
g.	Purchased a patent (an intangible asset) for $2,200 cash.
h.	Built an addition to the factory for $28,000; paid $7,700 in cash and signed a three-year note for the balance.
i.	Returned defective equipment to the manufacturer, receiving a cash refund of $1,500.

rev: 09_05_2014_QC_53105, 09_06_2014_QC_53105, 10_06_2014_QC_55409

9.

value:
1.00 points

Required information

Required:

1. & 2.

Post the T-accounts for each of the accounts on the balance sheet and enter the balances at the end of 2014 as beginning balances for 2015. (Two items have been given in the cash T-account as examples).

References

eBook & Resources

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10.

value:
1.00 points

Required information

4.	Prepare a trial balance at December 31, 2015.

References

eBook & Resources

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11.

value:
1.00 points

Required information

5.	Prepare a classified balance sheet at December 31, 2015.

       

rev: 09_05_2014_QC_53105, 09_06_2014_QC_53105

References

eBook & Resources

Check my work

12.

value:
1.00 points

Required information

6.	Compute the current ratio for 2015. (Round your answer to 2 decimal places.)

References

eBook & Resources

Answer 1

Part-1 and 2

Cash
Beg.	22000
(e)	18000	8800	(a)
(f)	17000	5300	(b)
(i)	1500	5200	(c)
		2200	(g)
		7700	(h)
End.	29300

	Investments (short-term)
Beg.	2600
(a)	8800
End.	11400

Accounts Receivable
Beg.	3700
End.	3700

Inventory
Beg.	28000
End.	28000

Notes Receivable (long term)
Beg.	2700
(b)	5300
End.	8000

Equipment
Beg.	47000	1500	(i)
(c)	20000
End	65500

	Factory building
Beg.	95000
(h)	28000
End	123000

Intangibles
Beg.	4100
(g)	2200
End	6300

Accounts payable
		20000	Beg.
		20000	End.

Accrued Liabilities Payable
		2800	Beg.
		2800	End.

Notes payable (short-term)
		6800	Beg.
		14800	(c)
		17000	(f)
		38600	End.

Long-term notes Payable
		42000	Beg.
		20300	(h)
		62300	End.

Common stock
		10500	Beg.
		1100	(e)
		11600	End.

Additional Paid-in Capital
		94500	Beg.
		16900	(e)
		111400	End.

Retained earnings
		28500	Beg.
		28500	End.

Transaction d does not have any effect as there is no monetary exchange.

Part-4

Cougar Plastics Company Trial Balance At December 31, 2015
Cash	29300
Investments (Short-term)	11400
Accounts receivable	3700
Inventory	28000
Notes receivable (long-term)	8000
Equipment	65500
Factory building	123000
Intangibles	6300
Accounts payable		20000
Accrued liabilities payable		2800
Notes payable (short-term)		38600
Notes payable (long-term)		62300
Common stock		11600
Additional paid-in capital		111400
Retained earnings		28500
Total	275200	275200

Part-5

Cougar Plastics Company Trial Balance At December 31, 2015
Assets
Current assets
Cash	29300
Investments	11400
Accounts receivable	3700
Inventory	28000
Total current assets	72400
Notes receivable	8000
Equipment	65500
Factory building	123000
Intangibles	6300
Total assets	275200
Liabilities
Current liabilities
Accounts payable	20000
Accrued liabilities payable	2800
Notes payable	38600
Total current liabilities	61400
Long-term notes payable	62300
Total liabilities	123700
Stockholder’s equity
Common stock	11600
Additional paid-in capital	111400
Retained earnings	28500
Total stockholder’s equity	151500
Total liabilities and stockholder’s equity	275200

Part-6

Current ratio = current assets / current liabilities = 72400/61400 = 1.18:1

The liquidity of Cougar Plastics is comparatively low. For every $1 of current liabilities, the availability of current assets is only $1.18.