5. (20 min.)
(a) Retained Earnings, January 1 $12,000
Add: Net Income 42,000*
54,000
Less: Dividends 14,000
Retained Earnings, December 31 $40,000
*($133,000 - $21,000 - $12,000 - $3,000 - $17,000 - $32,000 - $6,000)
(b) WALSH COMPANY
Balance Sheet
December 31, 1999
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Assets
Current assets
Cash .................................. $ 15,000
Accounts receivable ................... 11,000
Supplies .............................. 4,000
Prepaid insurance ..................... 6,000
Total current assets ................ 36,000
Property, plant, and equipment
Video equipment ....................... $210,000
Less: Accumulated depreciation覧
video equipment ................ 29,000 181,000
Total assets ........................ $217,000
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable ...................... $ 14,000
Salaries payable ...................... 3,000
Total current liabilities ........... 17,000
Long-term liabilities
Note payable .......................... 70,000
Total liabilities ................... 87,000
Stockholders' equity
Common stock .......................... $ 90,000
Retained earnings ..................... 40,000 130,000
Total liabilities and stockholders' equity $217,000
(c) Current ratio: $36,000 ｸ $17,000 = 2.12:1
Debt to total
assets ratio: $87,000 ｸ $217,000 = 40.1%
Return on
assets ratio: $42,000 ｸ [($183,000 + $217,000) ｸ 2] = 21.0%