Question

In: Accounting

Current Liabilities and Ratios Several accounts that appeared on Atunlu's 2017 balance sheet are as follows:...

Current Liabilities and Ratios

Several accounts that appeared on Atunlu's 2017 balance sheet are as follows:

Accounts Payable $81,000 Equipment $950,000
Marketable Securities 40,000 Taxes Payable 15,000
Accounts Receivable 115,400 Retained Earnings 250,000
Notes Payable, 12%, due in 60 days 20,000 Inventory 165,000
Capital Stock 1,150,000 Allowance for Doubtful Accounts 20,000
Salaries Payable 10,000 Land 600,000
Cash 65,000

Required:

1. Prepare the Current Liabilities section of Atunlu's 2017 balance sheet.

Atunlu
Partial Balance Sheet
As Of December 31, 2017
Current liabilities:?
Accounts payable ? $
?
?
?
Total current liabilities $

2. Compute Atunlu's working capital.

    $

3. Compute Atunlu's current ratio. Round your answer to one decimal place.

      : 1

    What does this ratio indicate about Atunlu’s condition?

    It seems that Atunlu has sufficient  current assets to meet its short-term obligations.

Solutions

Expert Solution

Based on the information available in the question, we can answer the following:-

Requirement 1:-

BALANCE SHEET OF ATUNLU
Liabilities Assets
Particulars Amount Particulars Amount
Current Liabilities
Accounts Payable         81,000
Notes Payable         20,000
Salaries Payable         10,000
Taxes Payable         15,000
Current Liabilities      126,000
Total Total                -  

Total Current Liabilities - $126,000

Requirement 2:-

Working Capital = Current Assets - Current Liabilities

Current Assets = Marketable Securities + Accounts Receivable + Cash + Inventory

Current Assets = $40,000 + $115,400 + $65,000 + $165,000

Current Assets = $385,400

Working capital = $385,400 - $126,000

Working Capital = $259,400

Requirement 3:-

Current Ratio = Current Assets/Current Liabilities

Current Ratio = $385,400/$126,000

Current Ratio = 3.0587

Current Ratio = 3.06 times(Rounded)

The Current Ratio of Atunlu indicates that it has enough assets at its disposal to meet its obligations as they come due. The Current Ratio of 3.06 indicates that the current assets are approximately 3 times its current liabilities which is a healthy ratio and it also means that Atunlu will be satisfy its short term obligations comfortably.

ekkarill92 answered 2 years ago
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