Answer:
Rocky Mountain Lodge
a) Balance Sheet
At December 31, Year 1:
Assets:
Current Assets:
Cash 37,680
Accounts receivable 12,720
Current assets $50,400
Long-term Assets:
Furnishings 70,440
Snowmobiles 18,480
Equipment 47,040
Buildings 600,000
Land 510,000
Long-term assets 1,245,960
Total $1,296,360
Liabilities and Equity:
Liabilities
Current Liabilities:
Accounts payable 65,760
Salaries payable 40,200
Interest payable 14,400
Current liabilities $120,360
Long-term liabilities
Notes payable 744,000
Total liabilities $864,360
Equity:
Capital stock 162,000
Retained earnings 270,000
Total equity 432,000
Total $1,296,360
b) The company is not in a strong financial position as of December 31, 2011.
c) Its current assets cannot settle its current liabilities. There is doubt if the company will be able to settle the long-term notes payable at the level of its current operations because the basis does not exist. It will still require funds to finance operations, as most of the investments are made in long-term assets (especially land and building).
Explanation:
a) Data and Calculations:
Cash 37,680
Accounts receivable 12,720
Furnishings 70,440
Snowmobiles 18,480
Equipment 47,040
Buildings 600,000
Land 510,000
Total $1,296,360
Accounts payable 65,760
Salaries payable 40,200
Interest payable 14,400
Notes payable 744,000
Capital stock 162,000
Retained earnings 270,000
Total $1,296,360
