E$2-15($Algo$)$ Analyzing the Effects of Transactions Using T$-$Accounts and Interpreting the Current Ratio as a Manager of the Company LO$2-4,2-5$

Higgins Company began operations last year. You are a member of the management team investigating expansion ideas that will require borrowing funds from banks. On January $1,$ the start of the current year, Higgins' T$-$account balances were as follows:

Assets:

Liabilities:

Stockholders' Equity:

Required:

Using the data from the T$-$accounts given, complete the accounting equation on January $1$ of the current year.

Prepare journal entries for transactions $($a$)$ through $($e$)$ for the current year.

a$.$ Borrowed $$8,000$ from a local bank, signing a note due in three years.

b$.$ Sold $$5,500$ of the investments for $$5,500$ cash.

c$.$ Sold one$-$half of the property and equipment for $$2,300$ in cash.

d$.$ Declared $$2,400$ in cash dividends to stockholders.

e$.$ Paid dividends to stockholders.

Enter the effects of the transactions in Requirement $2$ in the T$-$accounts.

Prepare a trial balance at December $31.$ Only include those accounts with a balance at year end.

Prepare a classified balance sheet at December $31$ of the current year.

Calculate the current ratio at December $31$ of the current year.