Question

In: Accounting

These financial statement items are for Jordan Company at year-end, July 31, 2012. Salaries and wages...

These financial statement items are for Jordan Company at year-end, July 31, 2012.

Salaries and wages payable $ 2,080 Notes payable (long-term) $ 1,800

Cash 14,200 Accounts receivable 9,780

Equipment 30,400 Accumulated depreciation—equip. 6,000

Accounts payable 4,100 Service Revenue 10,000

Common stocks 31,900 Rent Expense 1,000

Dividends 500

Instructions

(A) Prepare a classified balance sheet at July 31.

(B) please find liquidity ratio, working capital, solvency ratio.

These financial statement items are for Jordan Company at year-end, July 31, 2012.

Salaries and wages payable $ 2,080 Notes payable (long-term) $ 1,800

Cash 14,200 Accounts receivable 9,780

Equipment 30,400 Accumulated depreciation—equip. 6,000

Accounts payable 4,100 Service Revenue 10,000

Common stocks 31,900 Rent Expense 1,000

Dividends 500

Instructions

(A) Prepare a classified balance sheet at July 31.

(B) please find liquidity ratio, working capital, solvency ratio.

Expert Solution

Balance sheet and Ratios:

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A) Classified Balance sheet:

Retained earnings = Sales revenue - rent expense - dividend paid

= $10,000 - $1,000 - $500

=$8,500

B) Rations:

1. Liquidity Ratios:

Current Ratio = Current Assets / Current Liabilities

= $23,980 / $6,180

= 3.88

Availability of current assets of $3.88 against a single dollar of current liability. The quick ratio would also be the same as Current assets comprise of cash and account receivable which are both liquid assets.

2. Working Capital = Current Assets - Current Liabilities

= $23,980 - $6,180

= $17,800

3. Solvency ratio = (Net after tax income + Non-cash expenses) / (Short term liabilities + Long term liabilities)

= ($10,000 - $1,000 - $500) / ($6,180 + $1,800)

=$8,500 / $7,980

= 1.065

ekkarill92 answered 2 years ago

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