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The following accounts and account balances are taken from the records of Acme Enterprises Ltd. at December 31, 2018.
The following accounts and account balances are taken from the records of Acme Enterprises Ltd. at December 31, 2018.
Account
2018
2017
Accounts payable
$ 8,000 $ 5,000
Accounts receivable
6,000
4,000
Notes receivable
4,000
3,000
Bank loan
6,000
6,000
Building
25,000
22,000
Cash
2,000
1,000
Dividends
1,000
-0-
Equipment
18,000
14,000
Income taxes payable
3,000
2,500
Land
5,000
5,000
Merchandize inventory
19,000
24,500
Mortgage payable
5,000
7,000
Prepaid insurance
1,000
1,000
Share capital
48,000
48,000
Retained earnings, start of year
2,000
1,000
Net income
?
?
Other information:
a. One-half of the notes receivable at December 31, 2018 will be received in cash during 2019. All of the notes receivable at December 31, 2017 were received in cash during 2018.
b. $1,000 of the bank loan and $2,000 of the mortgage payable must be repaid by December 31, 2019.
Required:
1. Calculate net income for 2017 and 2018.
2. Prepare classified statement of financial position. Assume all accounts have normal balances. Disclose all amounts separately on the statement of financial position.
3. Does Acme Enterprises Ltd. have sufficient resources to meet its current obligations in 2019?
4. Refer to BDCC's note 4 shown in this chapter. Assume now that Acmes' property, plant, and equipment are combined into one amount on the statement of financial position. Prepare a suitable note to the financial statements. Assume there are no additions to PPE in 2017, and that there is no depreciation calculated for either year.
