Zahrina Fanny Aditya
GM 14
29321586
Maynard Company
Balance Sheet
As of June 1
Assets Liabilities and Shareholder's Equity
Current Assets: Current Liabilities:
Cash $ 34,983 Accounts payable $ 8,517
Accounts receivable $ 21,798 Accrued wages payable $ 1,974
Prepaid insurance $ 3,150 Bank notes payable $ 8,385
Merchandise inventory $ 29,835 Taxes payable $ 5,700
Supplies on hand $ 5,559 Total Current Liabilities $ 24,576
Note receivable, Diane Maynard $ 11,700
Total Current Assets $ 107,025 Non-current Liabilities:
Other noncurrent liabilities $ 2,451
Non-current Assets:
Building $ 585,000 Total Liablities $ 27,027
Accumulated depreciation on building $ -156,000
Equipment (at cost) $ 13,260
Accumulated depreciation on equipment $ -5,304 Shareholder's Equity
Land $ 89,700 Capital stock $ 390,000
Other noncurrent assets $ 4,857 Retained earnings $ 221,511
Total Non-current Assets $ 531,513
Total Shareholder's Equity $ 611,511
Total Assets $ 638,538 Total Liabilities and Shareholder's Equity $ 638,538
Maynard Company
Balance Sheet
As of June 30
Assets Liabilities and Shareholder's Equity
Current Assets: Current Liabilities:
Cash $ 66,660 Accounts payable $ 21,315
Accounts receivable $ 26,505 Accrued wages payable $ 2,202
Prepaid insurance $ 2,826 Bank notes payable $ 29,250
Merchandise inventory $ 26,520 Taxes payable $ 7,224
Supplies on hand $ 6,630 Total Current Liabilities $ 59,991
Note receivable, Diane Maynard $ -
Total Current Assets $ 129,141 Non-current Liabilities:
Other noncurrent liabilities $ 2,451
Non-current Assets:
Building $ 585,000 Total Liablities $ 62,442
Accumulated depreciation on building $ -157,950
Equipment (at cost) $ 36,660
Accumulated depreciation on equipment $ -5,928 Shareholder's Equity
Land $ 89,700 Capital stock $ 390,000
Other noncurrent assets $ 5,265 Retained earnings $ 229,446
Total Non-current Assets $ 552,747
Total Shareholder's Equity $ 619,446
Total Assets $ 681,888 Total Liabilities and Shareholder's Equity $ 681,888
Zahrina Fanny Aditya
GM 14
29321586
2. Make comments about how the financial condition as of the end of June compared with that at the beginning of June.
2.a. Assets, Liabilities, and Equity Composition
Comparing Maynard Company's Balance Sheet as of June 1 and as of June 30, it appears that total assets increase by 6.7%
which are mostly dominated by non-current assets. The beginning of June, asset composition is as follows: 17% Current Assets
and 83% Non-current Assets. At the end of June, total assets consist of 19% Current Assets and 81% Non-current Assets - Table
2.1.
Total liabilities increase in high percentage by 131%. As of June 1, total liabilites consists of 91% Current Liabilities and 9% Non-
current Liabilities. As of June 30, total liabilities consits of 96% Current Liabilities and 4% Non-current Liabilities. Shown in Table
2.2.
Total Shareholder's Equity increase by 1.3%. There has no change found on Capital Stock account. The composition is slightly
changed at the end of June compared to the beginning of June (see Table 2.3). The increase in Shareholder's Equity solely comes
from Retained Earning accounts. This indicates good sign for the company. Retained Earning growth is obtained from net
income. Net income is obtained from business activity of the company.
By comparing both Balance Sheet, the business activitiy comes from the purchase of Equipment at the end of June. It seems
that the Equipment purchase is funded through loan. Later on, this Equipment will be used for company's business activity
which eventually will generate revenue and income.
Table 2.1 Asset Composition
Type of Assets As of June 1 As of June 30 As of June 1 (%) As of June 30 (%)
Current Assets $ 107,025 $ 129,141 17 19
Non-current Assets $ 531,513 $ 552,747 83 81
Total Assets $ 638,538 $ 681,888 100 100
Table 2.2 Liabilities Composition
Type of Liabilities As of June 1 As of June 30 As of June 1 (%) As of June 30 (%)
Current Liabilites $ 24,576 $ 59,991 91 96
Non-current Liabilities$ 2,451 $ 2,451 9 4
Total Liabilities $ 27,027 $ 62,442 100 100
Table 2.3 Shareholder's Equity Composition
Type of Equities As of June 1 As of June 30 As of June 1 (%) As of June 30 (%)
Capital Stock $ 390,000 $ 390,000 64 63
Retained Earnings $ 221,511 $ 229,446 36 37
Total Equity $ 611,511 $ 619,446 100 100
2.b. Current Ratio
Table 2.4 Maynard Company Current Ratio
As of June 1 As of June 30
Current Assets $ 107,025 $ 129,141
Current Liabilities $ 24,576 $ 59,991
Current Ratio 4.4 2.2
Current ratio analysis is used to show the company's capabilitiy to pay off its current liabilities. The ideal ratio is 1-2.5. The ratio
means that the company has the ability to pay the current obligations 1 or 2.5 times. If the current ratio is below 1, it indicates
that the company cannot pay the current obligations.
As of June 30, Maynard Company current ratio is 2.2, significantly lower than as of June 1 which was 4.4. Though June 1 current
ratio is higher, it does not necessarily mean that it is better. The preferred current ratio is 1-2.5. Anything below or above is not
good. Higher current ratio can also indicate that the company could not manage loan or external funding resources very well. In
this case, June 30 current ratio is better and preferred for the company.
Zahrina Fanny Aditya
GM 14
29321586
3. Why do retained earnings not increase by the amount of June net income?
As mentioned in the case, the company's net income in June was $19,635. However, the company had to pay dividends to the
owner for $11,700.
Since dividends are the distribution of net income, the dividends have to be subtracted from the Retained Earning. The Retained
Earning calculation becomes $19,635 - $11,700 = $7,935.
Maynard Company
Statement of Retained Earning
As of June 30
Retained Earnings as of June 1 $ 221,511
Net Income $ 19,635
$ 241,146
Dividends $ -11,700
Retained Earnings as of June 30 $ 229,446
4. As of June 30, do you feel that Maynard Company is worth the amount in Shareholder's Equity $619,446? Explain.
Net worth can be obtained by modifying the Asset equals Liabilities plus Equity equation. By subtracting Liabilities from Asset, it
equals to Equity. The Equity is also called net worth.
Assets = Liabilities + Equities
Assets - Liabilities = Equities (net worth )
$681,888 - $62,442 = $619,446
Yes, Maynard Company is worth the amount on shareholder's equity.
