Marshall Tool and Die Company have been experiencing significant foreign competition and a declining market. Annual net
Question:
After analyzing accounts receivable and inventory, it has been determined that the allowance for un-collectibles should be increased by $75,000 and the inventory should be written down by $20,000. Based on recent appraisals, it is estimated that the plant and equipment have a market value of $1,285,000. The goodwill is traceable to the purchase of a small tooling company in 2013. Based on an analysis of cash flows associated with that acquisition, it is estimated that the goodwill has an impaired value of $0. Other assets represent a note receivable from officers of the corporation. The note calls for five annual payments of $8,309 including interest at the rate of 6%.
In response to the current situation, the company has decided to take the following actions:
a. Record the suggested impairment in all assets.
b. Restructure the note receivable from the officers to reflect four annual payments and an interest rate of 7.5%.
c. Restructure the note payable, which was due in 2019, to provide for 12 semiannual payments of $120,000 including interest at the annual rate of 6%.
d. Engage in quasi-reorganization to eliminate the deficit in retained earnings.
Required
1. Prepare a revised classified balance sheet to reflect the effect of managements actions.
2. Compute the following ratios before and after managements actions: current ratio and debt-to-equity ratio.
3. Given the above ratio analysis, if the ratios do not suggest an improvement, discuss the benefits of managements actions.
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng