Question

REQUIREMENTS:

1.	Compute Eastland's current? ratio, debt? ratio, and earnings per share. Round all ratios to two decimal places. Start by determining the formula for each ratio,beginning withthe current ratio,followed by the debt ratio, and then endings pershare.
2.	Compute the three ratios after evaluating the effect of each transaction that follows. Consider each transaction separately.
	a.	Borrowed $115,000 on a? long-term note payable.
	b.	On January? 1, Issued 15,000 shares of common? stock, receiving cash of $367,000.
	c.	Paid? short-term notes? payable, $30,000.
	d.	Purchased merchandise of $44,000 on? account, debiting Inventory.
	e.	Received cash on? account, $15,000.

Cash	$20,000		Accounts payable	$104,000
Short-term investments	36,000		Accrued liabilities	32,000
Accounts receivable, net	88,000		Long-term notes payable	165,000
Inventories	146,000		Other long-term liabilities	31,000
Prepaid expenses	7,000		Net income	99,000
Total assets	672,000
Short-term notes payable	40,000		# of common shares outstanding	49,000

Answer 1

Ratio Prior to adjustments
1-	current ratio	current assets/current liabilities	277000/176000	1.57
	current assets	36000+88000+146000+7000	277000
	current liabilities	40000+104000+32000	176000
2-	debt ratio	total of liabilities/total assets	372000/672000	0.55
	total of liabilities	current liabilities+long term notes payable+other long term liabilities	176000+165000+31000	372000
	total of assets			672000
3-	Earning per share	net income/no of shares	2.02
	net income		99000
	no of shares		49000
	Adjustments-effect on balances
2-		cash	long term notes payable	no of common stock	short term notes payable	accounts payable	inventory	accounts receivables
	opening balance	20000	165000	49000	40000	104000	146000	88000
	A-	115000	115000
	B-	367000		15000
	C-	-30000			-30000
	D-					44000	44000
	E	15000						-15000
	year end balance	487000	280000	64000	10000	148000	190000	73000
	Year end balance after the adjustments
	Cash	$487,000		Accounts payable	$148,000
	Short-term investments	36,000		Accrued liabilities	32,000
	Accounts receivable, net	73,000		Long-term notes payable	280,000
	Inventories	190,000		Other long-term liabilities	31,000
	Prepaid expenses	7,000		Net income	99,000
	Total assets	672,000
	Short-term notes payable	10,000		# of common shares outstanding	64,000
	Fixed assets = total of assets-total of current assets	672000-277000	395000
1-	current ratio	current assets/current liabilities	793000/190000	4.173684
	current assets	7000+190000+73000+36000+487000	793000
	current liabilities	10000+148000+32000	190000
2-	debt ratio	total of liabilities/total assets	501000/1188000	0.42
	total of liabilities	current liabilities+long term notes payable+other long term liabilities	190000+280000+31000	501000
	total of assets	fixed assets+current assets	395000+793000	1188000
3-	Earning per share	net income/no of shares	1.55
	net income		99000
	no of shares		64000