6 Shown below are some financial figures for SMA Consultants

6. Shown below are some financial figures for SMA Consultants, owned by S. Magbool. Cash, $6000; Accounts Payable, $35 000; Accounts Receivable, $14 000; Mort- gage Payable, $160 000; Land, $240 000; Buildings, $195 000; Equipment, $25 000. A. Prepare a classified balance sheet (Current Assets, Current Lia- bilities, etc.) dated September 30, 20- B. On the basis of the limited information given, would you say that Magbool\'s business has any kind of financial problem? Explain.

Solution

A.ans

Current Assets:

Cash 6000

Accounts Recievable 14000

Total $ 20,000

Fixed Assets:

Land 240000

Buildings 195000

Equipment 25000

Total 4,60,000

Current Liabilities:

Accounts Payable 35000

Mortgage Payable 160000

Total 195000

B.ans

Working Capital: Current Assets - Current liabilites

= 20000-195000

= -175000

From the above we can say that Magbools business is facing working capital problems which means it is facing liquidity position.