Question

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

Cash and cash equivalents	$	6,800
Accounts receivable (net)		38,000
Inventory		78,000
Property, plant, and equipment (net)		210,000
Accounts payable		57,000
Salaries payable		18,000
Paid-in capital		190,000

The only asset not listed is short-term investments. The only liabilities not listed are $48,000 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.

Determine the following at December 31, 2021:

Total current assets

Short-term investments

Retained earnings

Answer 1

Answer -

Total current assets = $129,200

Short term investments = $6400

Retained Earnings = $25,200

Explanation -

You can use the current ratio (current assets and current liabilities) to calculate the total current assets. With that you back into the amount of short term investments. All of the current liabilities are given so start there.

Accounts payable + Wages payable + Accrued Interest

57,000 + 18,000 + 1,000 = $76,000 total current liabilities.

With the current ratio being 1.7:1, that means that total current assets are 1.7 times the total current liabilities. Therefore 76,000 x 1.7 equals $129,200 total current assets. Now that you know the total, you can subtract out the known current assets to find short-term investments.

Total current assets = $129,200

Total current assets - cash - accounts receivable - inventories = short term investments.

129,200 - 6800 - 38000 - 78,000 = $6,400

Short term investments = $6400

Finally to find retained earnings, just add up the two sides of the balance sheet to find the difference.

Cash and cash equivalents $ 6800

Accounts receivable (net) 38000

Inventories 78000

Short term investments 6400

Property, plant, and equipment (net) 210,000

Total Assets $339,200

Accounts payable 57,000

salary payable 18,000

Interest payable 1,000

Note payable 48,000

Paid-in-capital 190,000

Retained Earnings ???

Total Liabilities & Equity $339,200 (must equal total assets)

Therefore Retained Earnings must be 25,200 for the balance sheet to be in balance.

= 339,200 - 57,000 - 18,000 - 1,000 - 48,000- 190,000 = 25,200

Retained Earnings = $25,200