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:

Cash

Debit Credit

$7,100$

Short$-$Term Investments

Debit Credit

$6,000$

Property and Equipment

Debit Credit

$4,400$

Liabilities:

Notes Payable $($current$)$

Debit Credit

$3,600$

Notes Payable $($noncurrent$)$

Debit Credit

$2,200$

Stockholders$$ Equity:

Common Stock

Debit Credit

$1,200$

Additional Paid$-$in Capital

Debit Credit

$5,400$

Retained Earnings

Debit Credit

$5,100$

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.

Borrowed $$7,500$ from a local bank, signing a note due in three years.

Sold $$5,000$ of the investments for $$5,000$ cash.

Sold one$-$half of the property and equipment for $$2,200$ in cash.

Declared $$2,200$ in cash dividends to stockholders.

Paid dividends to stockholders.

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

Prepare a trial balance at December $31.$

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

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

Answer rating: 100% (QA)

Completed Accounting Equation on January 1 Assets 7100 Cash 6000 ShortTerm Investments 4400 Property ... View the full answer