Case Study 21-1: Balance Sheets

Charles Royston was checking the year-end balances for his wood furniture manufacturing and re-
tail business and was concerned about the numbers. From what he remembered, his debts and ac-
counts receivable were higher than the previous year. Rather than get worked up over nothing, he
decided he would gather the information and make a comparison. For December 31, 2011, the busi-
ness had current assets of: $1,844 cash, $11,807 accounts receivable, and $9,628 inventory. Plant
and equipment totaled $158,700. Current liabilities were: accounts payable $13,446; wages payable $650; and property and taxes payable $4,124. Long-term debt totaled $92,800 and owner’s equity $70,959. By comparison, for December 31, 2010, the business had current assets of: $3,278 cash; $6,954 accounts receivable; $17,417 inventory. Plant and equipment totaled $144,500. Current liabilities were: accounts payable $9,250; wages payable $1,110; property and taxes payable $3,650. Long-term debt total.

Calculate the current ratio and the total debt to total assets ratio for 2010 and 2011.led $75,800; and owner’s equity $82,339.

1. Construct a comparative balance sheet for Contemporary Wood Furniture for year-end 2010
and 2011, including a vertical and horizontal analysis of the comparative balance sheet. Express percents to the nearest tenth of a percent.

2. Calculate the current ratio and the total debt to total assets ratio for 2010 and 2011.

*Note. Show all work and calculations.