Assignment 1:
E3-18 (Page 152)
The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable and inventories. The December 31, 2011, balance sheet revealed the following:

Given:
Inventories $840,000
Total assets $2,800,000
Current ratio 2.25
Acid-test ratio 1.2
Debt to equity ratio 1.8

Required:
Determine the following 2011 balance sheet items:
1. Current Assets
2. Shareholders’ Equity
3. Noncurrent Assets
4. Long-term Liabilities
E3-20 (Page 152)
Most decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the actions listed below will immediately increase (I), decrease (D) or have no effect (N) on the ratios shown. Assume each ratio is less than 1.0 before the action is taken.
Action
Current Ratio
Acid – Test
Ratio
Debt to
Equity Ratio
1. Issuance of long-term bonds
2. Issuance of short-term notes
3. Payment of accounts payable
4. Purchase of inventory on account
5. Purchase of inventory for cash
6. Purchase of equipment with a
4-year note
7. Retirement of bonds
8. Sale of common stock
9.Write-off of obsolete inventory
10. Purchase of short-term investment for cash
11. Decision to refinance on a long-term basis some currently maturing debt
Judgment Case 3-5 (Page 161)
Review the balance sheet provided for Marcus Clothing Corporation and the additional information provided on page 162. Identify and explain the deficiencies in the statement prepared by the company’s accountant. Include in your answer items that require additional disclosure, either on the face of the statement or in a note.
You recently joined the internal auditing department of Marcus Clothing Corporation. As one of your first assignments, you are examining a balance sheet…