Question

The following December 31, 2021, fiscal year-end account balance information is available for the Stonebridge Corporation:

Cash and cash equivalents $ 5,000
Accounts receivable (net) 22,000
Inventory 62,000
Property, plant, and equipment (net) 130,000
Accounts payable 41,000
Salaries payable 13,000
Paid-in capital 110,000

The only asset not listed is short-term investments. The only liabilities not listed are $32,000 notes payable due in two years and related accrued interest of $1,000 due in four months. The current ratio at year-end is 1.7:1.
Required:
Determine the following at December 31, 2021:
1. Total current assets
2. Short-term investments
3. Retained earnings

Answer 1

In the given case, the Current ratio given = 1.7 : 1 , current ratio = Current assets / Current liabilities.

Current liabilities are the liabilties which are payable within 1 year , that includes accounts payable , salaries payable and accrued interest (as due in 4 months).

Current liabilities = Accounts payable + Salaries payable + Accrued interest

Current liabilities = $ 41000 + $13000 + $ 1000

Current liabilities = $ 55,000.

1. Now,

Current Assets / Current liabilities = 1.7 : 1

Current assets / $ 55,000 = 1.7 / 1

Current Assets = $55000 * 1.7  

Current Assets = $ 93,500.

2.

Current Assets = Cash and cash equivalent + Accounts receivable + Inventory + Short term Investment.

$93,500 = $ 5000 + $ 22,000 + 62,000 + Short term investment

$93,500 = $ 89,000 + Short term investment

Short term investment = $ 93,500 - $ 89,000

Short term investment = $ 4,500.

3.

Total Assets = Current Assets + property plant and equipment

Total Assets = $ 93,500 + $ 130,000

Total Assets = $ 223,500

Now, we know total Assets = total Liabilities.

Thus , Total liabilities = $ 223,500.

Now, Total Liabilities = Current liabilities + Paid in capital + Note payable + Retained earning.

$ 223,500 = 55,000 + $ 110,000 + $ 32,000 + Retained earning

$ 223,500 = $ 197,000 + Retained earning

Retained earning = $ 223,500 - 197,000

Retained earning = $ 26,500