Given these transactions: 1. An engineering firm was formed when three engineers each invested $50,000( cash)...

 

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Given these transactions: 1. An engineering firm was formed when three engineers each invested $50,000( cash) 2. Each founder also invested an assortment of utility trucks, inclinometers, and other specialty equipment, valued at $10,000(each) 3. Borrowed $50, 000 to provide additional operating funds. 4. Rented office space at $1,000 per month. 5. Paid the first month's rent. 6. Paid a security deposit of $2,000. 7. A wealthy individual also wanted to invest in the firm, but not as an owner, so the firm borrowed $500, 000 from this individual at 18% per year. 8. Two additional staff members were hired at $6,000 per month. 9. The staff earned their first month's salary of $6,000 but were yet paid. 10. Supplies costing $45,000 were purchased. 11. Recorded depreciation for the first month. Assume that the equipment (in transaction 2) has useful lives of five years. 12. Accrued interest on the loan for one month. a. Arrange five columns in a worksheet or spreadsheet, corresponding to the following expanded balance sheet equation (assume zero beginning balances): Enter transactions 1 through 12 in the five columns. Total each column and verify that the balance sheet does indeed balance. Prepare a classified balance sheet, using the column totals from your spreadsheet. b. Evaluate the firm's liquidity, using the ratios. c. Evaluate the firm's asset management and debt management. d. On an overall basis, evaluate the firm's performance. What important information is missing? Even though the firm's performance seems somewhat questionable, could the missing information change your opinion? Why? Given these transactions: 1. An engineering firm was formed when three engineers each invested $50,000( cash) 2. Each founder also invested an assortment of utility trucks, inclinometers, and other specialty equipment, valued at $10,000(each) 3. Borrowed $50, 000 to provide additional operating funds. 4. Rented office space at $1,000 per month. 5. Paid the first month's rent. 6. Paid a security deposit of $2,000. 7. A wealthy individual also wanted to invest in the firm, but not as an owner, so the firm borrowed $500, 000 from this individual at 18% per year. 8. Two additional staff members were hired at $6,000 per month. 9. The staff earned their first month's salary of $6,000 but were yet paid. 10. Supplies costing $45,000 were purchased. 11. Recorded depreciation for the first month. Assume that the equipment (in transaction 2) has useful lives of five years. 12. Accrued interest on the loan for one month. a. Arrange five columns in a worksheet or spreadsheet, corresponding to the following expanded balance sheet equation (assume zero beginning balances): Enter transactions 1 through 12 in the five columns. Total each column and verify that the balance sheet does indeed balance. Prepare a classified balance sheet, using the column totals from your spreadsheet. b. Evaluate the firm's liquidity, using the ratios. c. Evaluate the firm's asset management and debt management. d. On an overall basis, evaluate the firm's performance. What important information is missing? Even though the firm's performance seems somewhat questionable, could the missing information change your opinion? Why?

Answer rating: 100% (QA)

a To complete the worksheet or spreadsheet you will need to create five columns corresponding to the expanded balance sheet equation assets liabilities equity revenues and expenses Then you can enter ... View the full answer