Chapter 4

1. Balance Sheet

   Below is the balance sheet for Labyrinth Services Co., which contains errors.

   Labyrinth Services Co.
   Balance Sheet
   For the Year Ended August 31, 2019
   Assets
   Current assets:
   Cash	$19,800
   Accounts payable	33,700
   Supplies	9,000
   Prepaid insurance	16,200
   Land	257,600
   Total current assets		$336,300
   Property, plant, and equipment:
   Building	$538,700
   Equipment	121,800
   Total property, plant, and equipment		875,900
   Total assets		$1,212,200
   Liabilities
   Current liabilities:
   Accounts receivable	$45,000
   Accumulated depreciationbuilding	221,800
   Accumulated depreciationequipment	36,000
   Net income	192,800
   Total liabilities		$495,600
   Owner's Equity
   Wages payable	$3,800
   Ruben Daniel, Capital	712,800
   Total owner's equity		716,600
   Total liabilities and owner's equity		$1,212,200

   Required:

   Prepare a corrected balance sheet.

   Labyrinth Services Co.
   Balance Sheet
   August 31, 2019
   Assets
   Current assets:
   		$
   Total current assets			$
   Property, plant, and equipment:
   		$
   	$
   	$
   Total property, plant, and equipment
   Total assets			$
   Liabilities
   Current liabilities:
   		$
   Total liabilities			$
   Owner's Equity
   Total liabilities and owner's equity			$

Working Capital and Current Ratio The following data were taken from recent financial statements of Starlight Corporation: Year 2 Year 1 Current assets $ 108,019 $ 77,636 Current liabilities 34,511 25,538 a. Compute the working capital and the current ratio for Year 2 and Year 1. Round the current ratio answers to two decimal places. Use the minus sign to indicate a negative working capital. Year 2 Year 1 Working capital Current ratio b. What conclusions concerning the company's ability to meet its financial obligations can you draw from part (a)? Starlight's working capital from Year 1 to Year 2 by $ Starlight's current ratio in Year 2. The changes in working capital and current ratio indicate that short-term creditors concerned about receiving payment from Starlight