Analyzing the Effects of Transactions Using T-Accounts and Interpreting the Current Ratio as a Manager of the Company
Zeber Company has been operating for one year (2011). You are a member of the management team investigating expansion ideas that will require borrowing funds from banks. At the start of 2012, Zeber€™s T-account balances were as follows:

Required:
1. Using the data from these T-accounts, determine the amounts for the following on January 1, 2012:
Assets $________ = Liabilities $________ + Stockholders€™ Equity $________
2. Enter the following 2012 transactions in the T-accounts:
(a) Borrowed $3,000 from a local bank, signing a note due in three years.
(b) Sold $1,000 of the investments for $1,000 cash.
(c) Sold one-half of the property and equipment for $1,250 in cash.
(d) Paid $300 in cash dividends to stockholders.
3. Compute ending balances in the T-accounts to determine amounts for the following on December 31, 2012:
Assets $________ = Liabilities $________ + Stockholders€™ Equity $________
4. Calculate the current ratio at December 31, 2012. If the industry average for the current ratio is 1.50, what does your computation suggest to you about Zeber Company? Would you suggest that Zeber Company increase its short-term liabilities? Why or whynot?

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Assets: Property and Equipment 2,500 Short-Term Investments 2,000 Cash 4,000 Liabilities: Short-Term Notes Payable 2,200 Long-Term Notes Payable 300 Stockholders' Equity: Contributed Capital Retained Earnings 4,000 2,000