Hanson Construction has an operating cycle of nine months. On December

QUESTION

Hanson Construction has an operating cycle of nine months. On December 31, 2009, Hanson has the following assets and liabilities:a. A note receivable in the amount of $1,000 to be collected in six months.b. Cash totaling $600.c. Accounts payable totaling $1,800, all of which will be paid within two months.d. Accounts receivable totaling $12,000, including an account for $8,000 that will be paid in two months and an account for $4,000 that will be paid in 18 months.e. Construction supplies costing $9,200, all of which will be used in construction within the next 12 months.f. Construction equipment costing $60,000, on which depreciation of $22,400 has accumulated.g. A note payable to the bank in the amount of $40,000, of which $7,000 is to be paid within the next year and the remainder in subsequent years.Required:1. Calculate the amounts of current assets and current liabilities reported on Hansons balance sheet at December 31, 2009.2. Comment on Hansons liquidity.
Answer 1 Current Assets Note Receivable $ 1,000 Cash $ 600 Accounts Receivable $ 8,000 Construction supplies $ 9,200 Total $ 18,800 Current Liabilities Accounts Payable $ 1,800 Accumulated Depreciation-Equipment $ 22,400 Note payable $ 7,000 Total $ 31,200 Answer 2 Hansons liquidity is

not sound as the amount of current liability is more than the current assets. This means that the company doesnot have enough liquid assets to pay the liabilites to be paid in the next 12 months.

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