Can you please help me on solving Problem 25. Thank you! Obligations under capit
ID: 2418724 • Letter: C
Question
Can you please help me on solving Problem 25. Thank you!
Obligations under capita Common stock Income taes pavable Git certiticates and cards Treusury stock The Star Hotel an eica Deerred income taves (currenty) Additional paid-in capital Acuet epenses Pheterred stock Adance deposits e notes (noncurrent) Mortgage Problem 25 ful entrepreneur, to assist in Yu, a slulc Ceserko Inn. The following are the conds Yu the e Yui a the Seiko 1 t in analyz bulane shee hor her twoyear-old hotel the Seik hualane sheets of the Seiko Inn ng Hee Yu, a successtul entrepren tel, the Seiko Inn. The followin ou have been hired by Jung Hee Yu, a successful e Seiko Inn Condensed Balance Sheets December 31, 20X1 and 20x2 20X1 $ 30,000 $ Accounts receivable Inventory Building (net) Property and equipment (net) Other assets 190,000 30,000 10,000,000 1,400,000 200,000 3500 1,500,000 10000 9,5000 Total Assets $ 1 11,850,000 $11,400,00 Accounts payable Wages payable Current maturities-LTD Long-term debt $ 140,000 1350 $ 140,000 60,000 500,000 8,500,000 9,200,000 2,650,000 135,000 Total Liabilities Owner's Equity 8,000,000 Total Liabilities and Owner's Equity 8,650,00 2,75000 2,750,00 $11,850,000 $11,40000 2. What were the 5. What were the total current liabilities at the en were thetotal current assets at the beginning ot 2 erh iabilities at the end of 20X1? was the amount of net working capital a 20X2? th amu of net working capital at the en ning of 20X1? ng capital at the end of 20X2?Explanation / Answer
Solution -
Note -
2) Total Current Asset at the beginning of 20X1 is not possible to calculate from the given data so calculated Current Asset for ending 20X1 & Beginning & ending for 20X2
Current Asset = Sum of all cash & cash equivalent assets which will be turned into cash or liquidate in one years' of time
here it is Cash + Accounts receivable + Inventory
4) Net working capital at the end of 20X2 is the difference between net current asset and net current liabilites
current liabilites = Sum of all payable which would be paid in one years' of time including current portion of long term liabilities
here it is Accounts Payable + Wages Payable + Current maturities-LTD
5 ) Property & Equipment ( net ) 20X1 = 1400000
Purchased During year 20X2 = 230000
Property & Equipment 20X2 = 230000 + 1400000 = 1630000
Property & Equipment 20X2 ( reported) = 1500000
SO the Difference is the Depreciation ie 1630000 - 1500000 = 130000
6) Changes in account receivable gives an inverse effect to the cash flow here AR has increased so it will give negative or reducing effect to the Cash flow
8 ) Owner's Equity 20X2 = 2750000
Owner's Equity 20X1 = 2650000
Increase in equity = 100000
HOwever there was an withdrawal ie if that withdrawal would not have been there then the Owner's Equity would have been more ie the profit was more so we add back the withdrawal amount to arrive at the net profit before withdrawal
ie 100000 + 50000 = 150000
Analysis of Balance sheet of two years 20X1 20X2 a Cash 30000 40000 b Accounts receivable 190000 225000 c Inventory 30000 35000 d Building ( net ) 10000000 9500000 e Property & Equipment ( net ) 1400000 1500000 f Other Assets 200000 100000 11850000 11400000 g Accounts Payable 140000 135000 h Wages Payable 60000 15000 i Current maturities-LTD 500000 500000 j Long Term Debt 8500000 8000000 k Total Liabilities 9200000 8650000 l Owner's Equity 2650000 2750000 11850000 11400000 1 Change in Cash During 20X2 ( a 20X2 - a 20X1 ) 10000 2 Total Current Asset at the beginning of 20X1 ( see Note ) NA 250000 2 Total Current Asset at the end of 20X1 & 20X2 ( ( see Note )) 250000 300000 3 Total Current Liabilities at the end of 20X1 ( g+h+i) 700000 4 Net working capital at the end of 20X2 ( see note ) 300000 5 Equipment for 230000 purchased during 20X2, so depreciation = ( see note ) 130000 6 Change in accounts receivale would give a reverse effect to Cash flow ( see note -35000 7 Long term debt paid during 20X2 ( j 20X1 - j 20X2 ) 500000 8 Net income before withdrawal of 50000 cash by owner ( see Note ) 150000