Acme Company - Speech or Presentation Example

Finance and Accounting of Response to Problem Acme Company Income ment for the year Sales 126,000 Less Operating Expenses 80,200 Income 45,800 Less Tax (30%) 13,740 Net Income 31,060 Statement of Returned Earnings Net Income for the year 2012 31,060 Less Dividends 20,000 Retained Earnings 2012 11,060 Acme Company Balance Sheet Current Assets Cash 25,000 Accounts Receivable 20,300 Inventory 81,000 Total Current Assets 126,300 Non-Current Assets Equipment 60,700 Less Accumulated Depreciation 20,000 Total Non-current Assets 40,700 Total Assets 167,000 Liabilities and Capital Current Liabilities Accounts Payable 66,140 Accrued Salary 1,800 Total Current Liabilities 67,940 Capital Shares Outstanding 87,000 Add retained Earnings 11,060 Total Capital 98,060 Total Liabilities and Capital 167,000 Liquidity Ratios Current Ratio = Current Assets/Current Liabilities (Fridson, and Alvarez, 2011) = 126,300 ÷ 67,940 = 1.

9 Quick Ratio = (Current Assets – Inventory)/ Current Liabilities = (126,300 – 81,000)/67,940 = 0.67 The current ratio is 1.9. That indicates that the company is in a position to furnish its short-term obligations. As for the quick ratio, it is 0.67. That indicates that the value of liquid assets available to furnish current obligations is less than the current liabilities. Response to Problem 2 Description Debit Credit Cash 9,000 Investments (Short-Term) 4,000 Accounts Receivable 13,000 Inventory 22,000 Notes Receivable (Long-term) 1,000 Equipment 48,000 Factory building 90,000 Intangibles 3,000 Accounts Payable 15,000 Accrued Liabilities Payable 2,000 Notes payable (short-term) 7,000 Long-term notes payable 46,000 Contributed Capital 90,000 Retained Earnings 30,000 Total 190,000 190,000 Cash Account Description $ Description $ Balance b/d 9,000 Short-term investments 10,000 Capital 12,000 Accounts receivable 8,000 Notes Payable 20,000 Equipment 28,000 Equipment 1,000 Intangibles 4,000 Balance c/d 53,000 Buildings 45,000 Total 95,000 Total 95,000 Short Term Investments Description $ Description $ Balance b/d 4,000 Cash 10,000 Balance c/d 14,000 Total 14,000 Total 14,000 Accounts Receivable Description $ Description $ Balance b/d 13,000 Cash 8,000 Balance c/d 21,000 Total 21,000 Total 21,000 Inventory Description $ Description $ Balance b/d 22,000 Balance c/d 22,000 Total 22,000 Total 22,000 Long-Term Notes Receivable Description $ Description $ Balance b/d 1,000 Balance c/d 1,000 Total 1,000 Total 1,000 Equipment Description $ Description $ Balance b/d 48,000 Cash 1,000 Cash 4,000 Short-term notes payable 24,000 Balance c/d 75,000 Total 76,000 total 76,000 Factory Building Description $ Description $ Intangibles 90,000 Cash 10,000 Long-term Notes payable 35,000 Balance c/d 135,000 Total 135,000 Total 135,000 Intangibles Description $ Description $ Balance b/d 3,000 Cash 4,000 Balance c/d Total 7,000 Total 7,000 Accounts Payable Description $ Description $ Balance c/d 15,000 Balance b/d 15,000 Total 15,000 Total 15,000 Accrued Liabilities Payable Description $ Description $ Balance c/d 2,000 Balance b/d 2,000 Total 2,000 Total 2,000 Notes Payable (Short-Term) Description $ Description $ Balance c/d 7,000 Balance b/d 7,000 Total 7,000 Total 7,000 Long-Term Notes Payable Description $ Description $ Balance b/d 46,000 Balance c/d 81,000 Factory Building 35,000 Total 81,000 Total 81,000 Capital Description $ Description $ Balance b/d 90,000 Balance c/d 102,000 Cash 12,000 Total 102,000 Total 102,000 Retained Earnings Description $ Description $ Balance c/d 30,000 Balance b/d 30,000 Total 30,000 Total 30,000 Item did does not require to be entered.

That is because it does not involve any payment made or liability incurred. Balance Sheet As at 31/12/12 Description $ $ Assets Current Assets Cash (93,000) Accounts receivable 21,000 Inventory 22,000 (50,000) Total Current Assets Non-Current Assets Notes Receivable (Long-Term) 1,000 Equipment 75,000 Factory Building 135,000 Intangibles 7,000 Total Non-Current Assets 218,000 Total Assets 168,000 Liabilities and Capital Current Liabilities Accounts Payable 15,000 Accrued Liabilities Payable 2,000 Notes Payable (Short Term) 7,000 Total Current Liabilities 24,000 Non-Current Liabilities Long-Term notes payable 81,000 Total Non-Current Liabilities 81,000 Total Liabilities 105,000 Contributed Capital 102,000 Add Retained Earnings 30,000 Total Capital 132,000 Total Liabilities and Capital 237,000 Current ratio = current assets/ Current liabilities 2012 2013 Current Assets = 49,000/24,000 (50,000)/24,000 = 2.

04 -2.08 The current ratio for 2013 is -2.08. That indicates that the company is not in a position to meet its current obligations from its current assets. In 2012, the company had a better current ratio of 2.04. Response to Problem 3 1. Assets = 32,666 Million Liabilities = 18,809 Million Owner’s Equity = 13,857 Million 2. If the company was to go through liquidation, the shareholders would get the $13, 857 million as it is the difference between the assets and liabilities. 3. Non-current liabilities for the year 2012 = 18,809 – 7,708 = $11,101Million 4.

Current Ratio = 9,784/7,708 = 1.3 5. In 2012, the company had a cash outflow. The cash outflow was $903 million 6. The cash flow from operating activities in 2012 is $3,762 million. The amount is not the same as the operating income due to the depreciation, interest and taxes charged against the income in the income statement. References Fridson, M.S. and Alvarez, F. (2011). Financial Statement Analysis: A Practitioners Guide 4th Ed. Hoboken, New Jersey: Wiley.