Posted: April 10th, 2016

From reading the balance sheet you prepared in (3), what events would you expect to take place in April? Explain your answer?

1. Calculate the following as of December 31, 2012 and 2011:
a. Working capital
b. Current ratio
2. On the basis of your answers to (1), comment on the company’s relative liquidity at the
beginning and end of the year. Explain the change in the company’s liquidity from the beginning
to the end of 2012.

STEP 1:
Current Assets FY2012 FY2011
T F F
T F F
T F F
T F F
T F F
T F F
TOTAL C C

Current Liabilities FY2012 FY2011
T F F
T F F
T F F
T F F
T F F
TOTAL C C
STEP 2:
C C
Working Capital

C C
Current Ratio

Explain the change in the company’s liquidity from the beginning to the end of 2012.
T
P3-3

Expert Consulting Services Inc. was organized on March 1, 2012, by two former college roommates. The
corporation provides computer consulting services to small businesses. The following transactions occurred
during the first month of operations:

March 2: Received contributions of $20,000 from each of the two principal owners of the new business in exchange
for shares of stock.
March 7: Signed a two-year promissory note at the bank and received cash of $15,000. Interest, along with the
$15,000, will be repaid at the end of the two years.
March 12: Purchased $700 in miscellaneous supplies on account. The company has 30 days to pay for the supplies.
March 19: Billed a client $4,000 for services rendered by Expert in helping to install a new computer system.
The client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days.
March 20: Paid $1,300 bill from the local newspaper for advertising for the month of March.
March 22: Received 25% of the amount billed to the client on March 19.
March 26: Received cash of $2,800 for services provided in assisting a client in selecting software for its computer.
March 29: Purchased a computer system for $8,000 in cash.
March 30: Paid $3,300 of salaries and wages for March.
March 31: Received and paid $1,400 in gas, electric, and water bills.

Required

1. Prepare a table to summarize the preceding transactions as they affect the accounting equation.
Identify each transaction with the date.

EXPERT CONSULTING SERVICES INC.
TRANSACTIONS FOR THE MONTH OF MARCH 2012

Assets = Liabilities +
Accounts Accounts Notes
Cash Receivable Computer Supplies Payable Payable
Date
F
3/2
F F
3/7
Bal. C C
3/12 F F
C C
Bal. C C
3/19 F
C C
Bal. C C C
3/20 F
C
Bal. C C C C
3/22 F F
C
Bal. C C C C
3/26 F
C
Bal. C C C C
3/29 F F
C
Bal. C C C C C
3/30 F
C
Bal. C C C C C
3/31 F
Bal. C C C C C C

TOTAL ASSETS: C TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY:

2. Prepare an income statement for the month ended March 31, 2012.

EXPERT CONSULTING SERVICES INC.
INCOME STATEMENT
FOR THE MONTH ENDED MARCH 31, 2012

Revenues:
T F
T F C
Expenses:
T F
T F
T F C
Net income C

3. Prepare a classified balance sheet at March 31, 2012.
Note: Classify Assets and Liabilities in the order of Liquidity

EXPERT CONSULTING SERVICES INC.
BALANCE SHEET
MARCH 31, 2012

Assets
Current assets:
T F
T F
T F
Total current assets C
Property, plant, and equipment:
T F
Total assets C

Liabilities and Stockholders’ Equity
Current liabilities:
T F
Long-term debt:
T F
Total liabilities C
Capital stock F
Retained earnings F
Total stockholders’ equity C
Total liabilities and stockholders’ equity C

4. From reading the balance sheet you prepared in (3), what events would you expect to take place in April?
Explain your answer.