Module Case Assignment: THE BALANCE SHEET
Assignment Overview
Review the background material for the second module before attempting the case below in order to answer a series of questions about the balance sheet for ABC Company shown below. Start with the accounting equation and pay attention to definitions of assets, liabilities, and equity.
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ABC Company
Balance Sheet
December 31, 20XX
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Assets
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Liabilities
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Current assets
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Current liabilities
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Cash
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$ 92,000
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Accounts payable
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$ 18,000
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Accounts recievable
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21,000
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Interest payable
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8 000
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Interest receivable
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1,000
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Inventory
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30,000
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Total current assets
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$ 144,000
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Total current liabilities
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$ 26,000
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Long-term assets
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Long-term liabilities
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Equipment
(net of depreciation)
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$ 128,000
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Note payable
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90.000
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Total long-te m assets
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$ 128,000
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Total long-term liabilities
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$ 90,000
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Equity
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Common stock
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10,000
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Paid-in capital
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50,000
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Retained earnings
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96 000
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Total equity
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$ 156,000
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Total assets
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$ 272,000
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Total liabilities and equity
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$ 272,000
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The background information for the module includes the basic ideas, but for more ideas, go to the optional background source principlesofaccounting.com. The site also offers multiple videos that you may find relevant. You may also use other sites for ideas to complete the table. Do not forget to reference the sources used.
Required
Answer the questions below and explain your answer with numbers, computations, or a sentence or two.
1. Determine total assets and total liabilities for ABC Company.
2. Complete the accounting equation below using numbers instead of words.
Assets = Liabilities + Equity
3. Are short-term payables or receivable larger? Explain the significance of the difference.
4. Is the order in which assets and liabilities are listed on the balance sheet significant? Explain.
5. Determine the total amount owed by ABC at the end of the year.
6. Does the company have more assets or liabilities? What is the significance of determining the difference between net assets and net liabilities?
7. If the company borrows an additional $10,000 which two balance sheet accounts will change? The new totals for total assets and total liabilities are ...
8. Explain retained earnings.
9. What is the "total wealth" of the company have according to the balance sheet?
10. Assume that the company paid $10,000 of dividends to the owners. Which balance sheet account (item) would have been affected by the payment?
Assignment Expectations
Respond to all questions showing your computations and/or using your own words. Do not use an essay format.
Show sources when appropriate and APA format is suggested, but not required.
• The objective for this assignment is to evaluate accounting concepts of balance sheet.
Module - SLP: THE BALANCE SHEET
Before you start the assignment, test your understanding of concepts covered in the assignment. It is not a graded quiz, but a tool for reviewing some key points. The tool can be used multiple times.
The purpose of this SLP is to apply ratio analysis to assess the financial health of ABC Company. Use the balance sheet presented in the case during this module to compute solvency and efficiency ratios. Compute three ratios based on balance sheet accounts for which you have sufficient information.
Assume that ABC Company is a small specialty retail store. Ratios are relevant when assessed over time or across companies. IBIS is a comprehensive resource containing market research and statistics, which can be used to compare ABC Company to the industry and leaders in the industry.
1. Show the computation of the three ratios.
2. Comment on the purpose and information conveyed by each ratio.
3. What did you learn about ABC Company by reviewing the three ratios?
4. What is your conclusion about the solvency and efficiency of the company?
5. How successful is ABC Company relative to the industry average and leaders in the small specialty retail store industry? Write two paragraphs or more. Include ratios found in the IBIS database to support your conclusion.
SLP Assignment Expectations
Show the formulas for the computations. Two to three sentences are sufficient to respond to questions 1 through 4. See above for question 5 instructions. Do not use an essay format.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.