Massimo Company has been operating for one year 2013

You #840
Massimo Company has been operating for one year (2013). You are a member of the
management team investigating expansion ideas, all of which will require borrowing funds from
banks. At the start of 2014, Massimo’s T-account balances were as follows:Required:1. Using
the data from these T-accounts, complete the accounting equation on January 1, 2014: Assets
$_____ 5 Liabilities $_____ 1 Shareholders’ Equity $_____2. Enter in the T-accounts the
following transactions that occurred in 2014:a. Paid one-half of the principal on the long-term
note payable. b. Sold $ 1,000 of the investments for $ 1,000 cash. c. Sold one-half of the
property and equipment for $ 1,250 cash. d. Borrowed $ 2,000 from the bank and signed a note
promising to pay the principal and interest at an annual rate of 5 percent in three years. e. Paid
$ 500 in dividends to shareholders.3. Compute ending balances in the T-accounts to complete
the statement of financial position on December 31, 2014: Assets $_____ 5 Liabilities $_____ 1
Shareholders’ Equity $_____4. Using the ending balances in the T-accounts, prepare a
classified statement of financial position at December 31, 2014, in good form. 5. Calculate the
current ratio at December 31, 2014. If the industry average for the current ratio is 1.50, what
does your computation suggest to you about Massimo Company? Would you support
expansion by borrowing? Why or why not?View Solution:
Massimo Company has been operating for one year 2013 You

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