Financial accounting

Problem 2 .1 B

Deep River Balance Sheet as at

31st December 2007

Non-Current Assets Land

140 ,000

Buildings

430 ,000

Furnishings

22 ,600

Equipment

9 ,000 601 ,600

Current Assets Accounts Receivable

3 ,300

Cash

9 ,100 12 ,400

Current Liabilities Accounts Payable 27 ,400 Salaries Payable 13 ,200 Interest Payable 4 ,000 44 ,600

Net Current Liabilities

32 ,200

Non-Current Liabilities Notes Payable

217 ,000

Net Assets

352 ,400

p Equity Capital Stock

150 ,000

Retained Earnings

202 ,400 352 ,400 b ) Without computing any financial ratios , one can immediately notice that the financial position of the organization is highly weak . This stems from the significant net current liabilities amounting to 32 ,200 This implies that the current assets are materially lower than the current liabilities and at the end of December are not capable to cover such short-term commitments . If no remedial action is taken by management on such aspect , there is a high probability that the company will face cash problems in the nearby future

Problem 2 .2B

b . A trade debtor paid the debt outstanding by cash amounting to 500

c . Purchased Furniture for the company amounting to 5 ,000 . Paid 3 ,000 by cash the remaining is on payable on account in accordance with stipulated credit terms

d . Paid trade creditors by cash amounting to 2 ,000

e . Received 10 ,000 cash stemming from an issue of common stock

f . Bought furniture costing 3 ,000 on credit

Reference

Weetman

(2003 . Financial and Management Accounting . Third Edition Essex : Pearson Education Limited

FINANCIAL ACCOUNTING COURSEWORK

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