Question

Question #2

Statement of financial position items for Markham Inc. follow at Dec 31, 2018:

Goodwill 86,200 Accumulated depreciation—furniture 107,700 Accounts receivable 59,000 Accumulated other comprehensive      income 29,000 Payroll taxes payable 6,000 Inventory 126,222 Bonds payable due 2022 526,000 Bank indebtedness 32,000 Patents 50,000 Accrued liabilities 32,000 Cash 22,500 Building 1,001,000 Leasehold improvements 40,000 Accumulated depreciation - leaseholds 10,000 Land 99,000 Common shares (20,000 shares issued) 200,000 Notes receivable (due in 2019) 50,000 Preferred shares (15,000 shares issued) 170,000 Allowance for uncollectible accounts 5,200 Accumulated amortization - patents 10,000 Notes payable (of which 40,000 is due in 2019) 280,000 Prepaid expenses 83,600 Accounts payable 98,500 Furniture 325,000 Lease Liability (current) 26,600 Lease liability (non-current) 109,000 Retained earnings ? Investments in Bonds (plan to hold until redemption in 2022) 78,000 Income taxes receivable 23,000 Accumulated depreciation—building 269,000

Required

• 1. Prepare a classified statement of financial position in good form for Markham Inc at Dec. 31, 2018. (Use format from Ch 5 of your text.)
• The numbers of authorized shares are as follows: 400,000 common and 20,000 preferred. (There have been no shares issued/redeemed during the year.)
• Classify items based on the most likely classification on what you know about when the item is usually realized/settled. State any assumptions needed.

0. 2. Calculate the following ratios based on your statement above. You must type out your calculations outside your cells (each component and amount). Use the formulas from Appendix 5A.
1. Current ratio
2. Quick ratio
3. Debt to total assets
4. Book value per share *

* common shareholder’equity = shareholders’ equity – preferred shares

Answer 1

Balance sheet
Assets
Current assets
Accounts receivable	53,800
Cash	22,500
Notes receivable (due in 2019)	50,000
Income taxes receivable	23,000
Inventory	126,222
Prepaid expenses	83,600
total of current assets		359,122
Investments in Bonds (plan to hold until redemption in 2022)		78,000
P P& E:
Leasehold improvements net of accumulated depreciation		30000
Furniture net of accumulated depreciaion		217300
Building net of accumulated depreciation		732000
land		99000
Intangibles:
Patents net of accumulated depreciation		40000
goodwill		86200
total of assets		1,641,622
Liabilities and shareholders equity
Current liabilities
notes payable	40000
Accounts payable	98,500
Lease Liability (current)	26,600
Payroll taxes payable	6,000
Bank indebtedness	32,000
Accrued liabilities	32,000
total of current liabilities		235100
notes payable		240000
Lease liability (non-current)		109,000
Bonds payable due 2022		526,000
total of liabilities		1110100
shareholders equity
common stock	200000
preferred stock	170000
accumulated other comprehensive income	29000
retained earnings = 531522-200000-170000-29000	132,522
total of share holders equity (1641622-1110100)		531,522
total of liabilities and shareholders equity		1,641,622
current ratio =current assets/current liabilities	359122/235100	1.53
quick ratio = quick assets/current liabilities	(total current assets-inventory)/total of current liabilities	(359122-126222)/235100	0.99
debt to asset ratio = total of liabilities/total of assets	1110100/1641622	0.68
book value per share = common shareholders equity/no of common stock	(531522-170000)/40000	9.04