Question

Classified Balance Sheet (Number 2)

College Spirit sells sportswear with logos of major universities. At the end of 2019, the following balance sheet account balances were available.

Accounts payable	$104,700		Income taxes payable	$ 11,400
Accounts receivable	6,700		Inventory	495,400
Accumulated depreciation	23,700		Long-term investment	124,900
Bonds payable	50,000		Note payable, short-term	50,000
Cash	13,300		Prepaid rent (current)	54,000
Common stock	300,000		Retained earnings, 12/31/2019	242,500
Furniture	88,000

Required:

1. Prepare a classified balance sheet for College Spirit at December 31, 2019.

College Spirit
Balance Sheet
December 31, 2019
Assets
Current assets:
Cash	$
Accounts receivable
Inventory
Prepaid rent
Total current assets		$
Long-term investments:
Investment
Property, plant, and equipment:
Furniture	$
Less: Accumulated depreciation
Total assets		$
Liabilities
Current liabilities:
Accounts payable	$
Notes payable
Income taxes payable
Total current liabilities		$
Long-term liabilities:
Bonds payable
Total liabilities		$
Stockholders' Equity
Common stock	$
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity		$

Feedback

1. Prepare a balance sheet with proper form and using the proper heading. List assets first using the proper classifications (current assets; property, plant, and equipment; intangible assets) in order of liquidity, and total. List liabilities using the proper classifications (current liabilities; long-term liabilities) and total. List stockholders' equity using proper classifications (contributed capital; and retained earnings) and total.

2. Compute College Spirit's working capital and current ratio at December 31, 2019. Round the current ratio answer to two decimal places.

Working Capital : ?
Current Ratio: ?

3. Conceptual Connection: Comment on College Spirit's liquidity as of December 31, 2019.

The working capital and current ratios show that College Spirit has adequate current assets to cover all of the current liabilities that will become due in the near future.

Answer 1

Answer to Part 1.

Answer to Part 2.
Working Capital = Current Assets - Current Liabilities
Working Capital = $569,400 - 166,100
Working Capital = $403,300

Current Ratio = Current Assets / Current Liabilities
Current Ratio = 569,400 / 166,100
Current Ratio = 3.43:1