DIXIDIXIE TRANSPORTATION SERVICE
MANAGER`S REPORT
8 P.M. THURSDAY
Assets
Liabilities & Owners` Equity
Cash
$69,000
Liabilities:
Accounts Receivable
70,000
Notes Payable
$288,000
Supplies
14,000
Accounts Payable
26,000
Land
70,000
Total Liabilities
$314,000
Building
80,000
Owners' Equity:
Automobiles
165,000
Capital Stock
$92,000
Retained Earnings
62,000
Total Owners' Equity
$154,000
Total Assets
$468,000
Total Liabilities & Owners' Equity
$468,000
MERCER COMPANY
BALANCE SHEET
December 31 , 2011
Assets
Liabilities & Owners` Equity
Cash
$36,300
Liabilities:
Accounts Receivable
56,700
Accounts Payable
$43,800
Office Equipment
12,400
Notes Payable
207,000
Land
90,000
Total Liabilities
$250,800
Building
210,000
Owners' Equity:
Total Assets
$405,400
Capital Stock
$75,000
Retained Earnings
79,600
Total Owners' Equity
$154,600
Total Liabilities & Owners' Equity
$405,400
Assets = Lİabilities + Owners Equity
$578,000
$1,132,500
$307,500
$342,000
$562,500
$120,300
$236,000
$570,000
$187,200
MILLER COMPANY
STATEMENT OF CASH FLOWS
FOR THE PERIOD OCTOBER 1–31, 2011
Cash flows from operating activities:
Cash received from revenue transactions
Cash paid for expenses
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of equipment
Net cash of equipment
Cash flows from financing activities:
Payment of bank loan
Issuance of capital stock
Net cash flows from financing activities
Increase in cash for month:
Cash balance, October 1, 2011
Cash balance, October 31, 2011
$10,000
$ (7,200)
$2,800
$ (2,500)
$ (2,500)
$ (2,000)
$6,000
$4,000
$7,450
$11,750
a.Moon Corporation has $ 18,000 of cash and $ 26,000 accounts receivable , a total of $ 44,000 in
what are sometimes referred to as current assest. Moon Corporation has $ 12,400 notes payable and
$ 9,600 of accounts payable , a total of
$ 22,000 of liabilities. Star Corporation has $ 4,800 of cash
and $ 9,600 accounts receivable , a total of $ 14,400 in what are sometimes referred to as current
assest. Star Corporation has $ 22,400 notes payable and $ 43,200 of accounts payable , a total of
$65,600 of liabilities.
The relationship of current assets to current liabilities is called the current ratio. If the current ratio is
less than 2, it means that the company cannot be loaned.
Current Ratio=(Current Assets)/(Current Liabilities)
For Moon Corporation, Current Ratio=$ 44,000/$ 22,000=2
For Star Corporation, , Current Ratio=($ 14,400)/$ 65,600=0.22
In this case, it is better to loan of $ 12,000 to Moon Corporation.
b. If an investor wants to buy a company's shares, he/she should evaluate the company's total assets,
shareholders' equity and financial risks.
Shareholders' Equity:


Moon Corporation’s Shareholders' Equity = $98,400
Star Corporation’s Shareholders' Equity = $116,800
Star Corporation appears stronger in terms of equity.
Debt-to-Equity Ratio (Debt-to-Equity Ratio) = Total Debt / Shareholders' Equity
Moon Corporation:
Debt-to-Equity Ratio = $22,000 / $98,400 = 0.22 (Low risk)
Star Corporation:
Debt-to-Equity Ratio = $65,600 / $116,800 = 0.56 (Higher risk)
To summarise, Moon Corporation has less debt, making it a safer investment.
Star Corporation has larger assets and equity, but a higher debt load. For the investor, Moon
Corporation is a better choice because it is more reliable.