Short Problems
1.Bricklin Company has $600 in its checking account. A customer owes Bricklin $1,000. The company has store equipment that cost $1,500 and a truck that cost $5,000. Bricklin Company owes the bank $3,500 on the truck loan of which one payment of $700 is due in one week, and owes $4,000 to creditors for its monthly operating expenses, including rent, all of which is due in the next 30 days.
A.List Bricklin Company’s assets and the dollar amount of each.
B.List Bricklin Company’s liabilities and the dollar amount of each.
C.Is Bricklin Company solvent? Explain.
2.Matura, Inc. reported the following activities for the year:
?Borrowed $300,000 from the bank to be repaid in 5 years
?Issued stock to investors for $35,000 cash
?Paid dividends to shareholders totaling $10,000
?Purchased equipment by promising to pay $145,000 to a creditor over the next 3 years
A.Identify which activities are debt investments.
B.Identify which activities are equity investments.
3.Sonnan Company showed profits for the last two years totaling $115,000 and $250,000, respectively. Sonnan Company paid a total of $94,000 to its owners over the two-year period.
A.How much remains in Sonnan Company as retained earnings at the end of the second year of business?
B.Briefly explain the concept of ‘earning power’ as it pertains to Sonnan Company.