Question

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

Cash and cash equivalents	$	5,300
Accounts receivable (net)		23,000
Inventory		63,000
Property, plant, and equipment (net)		135,000
Accounts payable		42,000
Salaries payable		14,000
Paid-in capital		115,000

The only asset not listed is short-term investments. The only liabilities not listed are $33,000 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 investment

3.Retain earnings

Answer 1

1.

Current Liabilities = Accounts payable + Salaries payable + Accrued interest = $42,000 + $14,000 + $1,000 = $57,000

PS:- $33,000 notes payable, is not current liability as it is not due in next 12 months.

Given Current Ratio = 1.7

Current Ratio = Current Assets / Current Liabilities

1.7 = Current Assets / $57,000

Current Assets = $96,900

2.

Current Assets = Cash and cash equivalents + Accounts receivable (net) + Inventory + short-term investments = $5,300 + $23,000 + $63,000 + short-term investments

Short-term investments = $96,900 - ($5,300 + $23,000 + $63,000) = $5,600

3.

Total Assets = Current Liabilities + Property, plant, and equipment (net) = $96,900 + 135,000 = $231,900

Shareholders equity = Total Assets - Current liabilities - Non current liabilities = $231,900 - $57,000 - $33,000 = $141,900

Shareholders equity = Paid in capital + Retained earnings

Retained earnings = $141,900 - $115,000 = $26,900