Question: Let’s examine a case using Greg’
Let’s examine a case using Greg’s Tunes and Sal’s Silly Songs. It is now the end of the first year of operations, and the stockholders want to know how well each business came out at the end of the year. Neither business kept complete accounting records, and no dividends were paid. The businesses throw together the data shown on the next page at year-end:
To gain information for evaluating the businesses, the stockholders ask you Several questions. For each answer, you must show your work to convince the stockholders that you know what you are talking about.
Requirements:
1. Which business has more assets?
2. Which business owes more to creditors?
3. Which business has more stockholders’ equity at the end of the year?
4. Which business brought in more revenue?
5. Which business is more profitable?
6. Which of the foregoing questions do you think is most important for evaluating these two businesses? Why?
7. Which business looks better from a financial standpoint?
Transcribed Image Text:
Sal's Silly Songs: Total Assets $ 23,000 Common Stock 8,000 Total Revenues 35,000 Total Expenses 22,000 Greg's Tunes: Total Liabilities $ 10,000 Common Stock 6,000 Total Expenses 44,000 Net Income 9,000
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