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In: Accounting

Balance sheet December 31 Assets 2007 2006 Cash $25,000 $40,000 Short term investments 15,000 60,000 Accounts...

Balance sheet

December 31

Assets 2007 2006

Cash $25,000 $40,000

Short term investments 15,000 60,000

Accounts receivable 50,000 30,000

Inventory 50,000 70,000

Property, plant and equipment (net) 160,000 200,000

Total assets $300,000 $400,000

Liabilities and stockholders equity

Accounts payable $20,000 $30,000

Short term notes payable 40,000 90,000

Bonds payable 80,000 160,000

Common stock 60,000 45,000

Retained earnings 100,000 75,000

Total liabilities and stockholders equity $300,000 $400,000

Income statement (for the year ended December 31, 2007)

Net sales $360,000

Cost of goods sold 184,000

Gross profit 176,000

Expenses

Selling expenses 30,000

Administrative expenses 59,000

Total expenses 89,000

Income before interest expense and taxes 87,000

Interest expense 12,000

Income before income taxes 75,000

Income tax expense 30,000

Net income $45,000

Additional information

120,000 shares were outstanding in 2007:90,000 shares were outstanding in 2006
Market value of common stock on December 31, 2007 was $12 per share.

Working capital
Current Ratio
Quick ratio
Cash ratio

Expert Solution

Working capital =Current Assets-Current Liabilities

Current Ratio= Current assets / Current liabilities

Quick Ratio= liquid current assets / Current liabilities

Cash ratio= cash and cash equivalents / Current liabilities

Current Assets	2007	2006
Cash	$ 25,000	$ 40,000
Short term investments	$ 15,000	$ 60,000
Accounts receivable	$ 50,000	$ 30,000
Inventory	$ 50,000	$ 70,000
Total	$ 140,000	$ 200,000
Current Liabilities	2007	2006
Accounts payable	$ 20,000	$ 30,000
Short term notes payable	$ 40,000	$ 90,000
Total	$ 60,000	$ 120,000
Working Capital	$ 80,000	$ 80,000
Current Ratio	2.33	1.67


Liquid Assets	2007	2006
Cash	$ 25,000	$ 40,000
Short term investments	$ 15,000	$ 60,000
Accounts receivable	$ 50,000	$ 30,000
Total Liquid Assets	$ 90,000	$ 130,000
Total Current Liabilities	$ 60,000	$ 120,000
Liquid Ratio	1.5	1.083


Cash and cash Equivalents	2007	2006
Cash	$ 25,000	$ 40,000
Short term investments	$ 15,000	$ 60,000
Total Cash and cash Equivalents	$ 40,000	$ 100,000
Total Current Liabilities	$ 60,000	$ 120,000
Cash Ratio	0.67	0.83

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