Reference no: EM132609803

Question - "Applying for a Loan" You are going to apply for a loan for your business. Your banker told you that you will need to bring him a set of financial statements that show your business income, your business's financial position (balance sheet), and your cash flows for the year to date. you have collected the following information from your accounting records, which you keep manually in a three-ring binder. Use the information to make a balance sheet. Account Balance Accounts payable $2,500 Accounts receivable $5,000 Building and equipment $112,000 Note to bank $27,500 Customer deposits $3,000 Cash $15,000 Accumulated depreciation $35,000 Capital portion of owners' equity $50,000 Retained earnings $14,000.

1. What is the amount of current and long-term assets that you have?

2. Can you pledge the retained earnings of $14,000 as collateral for the new loan? Why or why not?

3. Calculate the current ratio. Using the rule of thumb given in the text, is this a good or bad ratio?

4. Why would the current ratio matter to your banker?"