Question

The following December 31, 2018, fiscal year-end account balance information is available for the Stonebridge Corporation: Cash and cash equivalents Accounts receivable (net) Inventories Property, plant, and equipment (net) Accounts payable Wages payable Paid-in-capital $ 5,000 20,000 60,000 120,000 44,000 15,000 100,000 The only asset not listed is short-term investments. The only liabilities not listed are a $30,000 note payable due in two years and related accrued interest of $1,000 due in four months. The current ratio at year-end is 1.5:1. Required: Determine the following at December 31, 2018: 1. Total current assets 2. Short-term investments 3. Retained earnings

Answer 1

1. Total current Assets : Current assets include cash, cash equivalents, accounts receivable, stock inventory, marketable securities, pre-paid liabilities and other liquid assets.

As per current ratio. i.e. Current Assets / Current liabilities. = 1.5 : 1.

And current liabilities is

• Accounts payable $ 44,000
• Wages payable $ 15,000
• Accured intrest payable in 4 months $ 1,000

Total liabilities $ 60,000 .

Therefore , the Total Current Assets according to current ratio should be . $ 60,000 x 1.5 = 90,000  

2. Short term investment will be.

Total current Assets is $ 90,000 but as per balance sheet data given the short term investment is missing .

Therefore, the balancing figure will be short term investment

• Cash and cash equivalents. 5,000
• Accounts Receivables (net). 20,000
• Inventories. 60,000
• Short term investment . (B/f)    $ 5,000

Total current Assets   $ 90,000.

3. Retained Earnings.

Balance sheet

Liablities $ Assets. $

1. Paid in capital 100,000 Cash equivalents 5,000
2. Retained Earnings (b.f) 20,000 Accounts receivable 20,000
3. Long term liablities 30,000 short term investment. 5,000
4. Accounts payable 44,000 Inventory 60,000
5. Wages payable 15,000 plant machinery etc. 120,000
6. Intrest payable 1,000

  Total 210,000 210,000.

so, Retained Earnings will be $20,000.