The adjusted trial balance for McC Bowling Alley at December 31, 2019, contains the following accounts
| Debit | Credit | ||
| Buildings | $128,800 | Owner's Capital | $115,000 |
| Accounts Receivable | 14,520 | Accumulated Depreciation-Buildings | 42,600 |
| Prepaid insurance | 4,680 | Accounts Payable | 12,300 |
| Cash | 18,040 | Notes Payable | 97,780 |
| Equipment | 62,400 | Accumulated Depreciation-Equipment | 18,720 |
| Land | 67,000 | Interest Payable | 3,800 |
| Insurance Expense | 780 | Service Revenue | 17,180 |
| Depreciation Expense | 7,360 | ||
| Interest Expense | 3,800 | ||
| $307,380 | $307,380 |
Instructions
- Prepare a classified balance sheet; assume that $20,000 of the note payable will be paid in 2020.
- Comment on the liquidity of the company.
Solution
a.
McC Bowling Alley
Classified balance sheet
December 31, 2019
Classified balance sheet
December 31, 2019
b.
Current Assets is exceeds the Current liabilities ($37,240 - $36,100 = $1,140) and approximately 50% of current assets are in the form of cash that means the company's liquidity appears to be comparably good.