Suppose the business sold only services and not products. Which account(s) would you not expect to see in its balance sheet?
The balance sheet given below, how would you assess the short-run solvency of the business? (Solvency refers to the ability of a business to pay its liabilities on time.)
|
Assets |
Liabilities & Owners’ Equity |
||
|
Cash |
$1,500,000 |
Accounts Payable |
$700,000 |
|
Accounts Receivable |
$1,000,000 |
Accrued Expenses Payable |
$600,000 |
|
Inventory |
$1,800,000 |
Short-term Notes Payable |
$1,500,000 |
|
Prepaid Expenses |
$300,000 |
Total Current Liabilities |
$2,800,000 |
|
Total Current Assets |
$4,600,000 |
Long-term Notes Payable |
$2,000,000 |
|
Property, Plant, & Equipment |
$4,800,000 |
Owners Equity: |
|
|
Accumulated Depreciation |
($1,400,000) |
Capital Stock (10,000 shares) |
$1,000,000 |
|
Cost Less Depreciation |
$3,400,000 |
Retained Earnings |
$2,200,000 |
|
Total Assets |
$8,000,000 |
Total Owners’ Equity |
$3,200,000 |
|
Total Liabilities & Owners’ Equity |
$8,000,000 |
||