Define current liabilities?
How to account for short-term obligations expected tobe refinanced.
Define current liabilities?
How to account for short-term obligations expected tobe refinanced.
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Sherwood, Inc., the parent company of Tasty snack foods andSuper beverages, had the following current assets and currentliabilities at the end of two recent years:
Current Year (in millions) | Previous Year (in millions) | |||
Cash and cash equivalents | $3,524 | $3,810 | ||
Short-term investments, at cost | 2,503 | 7,076 | ||
Accounts and notes receivable, net | 7,957 | 7,258 | ||
Inventories | 1,656 | 736 | ||
Prepaid expenses and other current assets | 552 | 272 | ||
Short-term obligations | 294 | 3,125 | ||
Accounts payable and other current liabilities | 6,970 | 6,370 | ||
Income taxes payable | 96 | 585 |
a. Determine the (1) current ratio and (2)quick ratio for both years. Round to one decimal place.
Current Year | Previous Year | |
1. Current ratio | ||
2. Quick ratio |
b. The solvency of Sherwood has__increase ordecrease____ some over this time period. Both the current and quickratios have_increase or decrease_____ . Sherwood is a_strong orweak____ company with__ample or insufficient____ resources formeeting short-term obligations. Its solvency as measured by thecurrent and quick ratios has__improved or detoriated____ duringthis period.
Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had the following current assets and current liabilities at the end of two recent years:
Current Year (in millions) | Previous Year (in millions) | |||
Cash and cash equivalents | $1,724 | $1,749 | ||
Short-term investments, at cost | 1,224 | 3,248 | ||
Accounts and notes receivable, net | 3,892 | 3,331 | ||
Inventories | 2,280 | 2,280 | ||
Prepaid expenses and other current assets | 760 | 843 | ||
Short-term obligations | 304 | 3,227 | ||
Accounts payable and other current liabilities | 7,197 | 6,579 | ||
Income taxes payable | 99 | 604 |
a. Determine the (1) current ratio and (2) quick ratio for both years. Round to one decimal place.
Current Year | Previous Year | |
1. Current ratio | ||
2. Quick ratio |
The net asset âproperty under capital leaseâ has a 2014 balanceof $2,543 million ($5,589 - 3,046). Liabilities for capital leasestotal $3,097 ($309 + 2,788). Why do the asset and liability amountsdiffer?
Prepare a 2014 summary entry to record Company X lease payments,which were $600 million.
Balance Sheet (In Millions) | ||
2014 | 2015 | |
Assets | ||
Property: | ||
Property under capital lease | $5,589 | $5,589 |
Less: Accumulated amortization | ($3,046) | ($3,147) |
Liabilities | ||
Current liabilities: | ||
Obligations under capital leases due within 1 year | $309 | $327 |
Long-term debt: | ||
Long-term obligations under capital leases | $2,788 | $3,023 |