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Continuing Venture, Inc. has the following balance sheet, with negative owners equity. Are they solvent?...

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Accounting

  1. Continuing Venture, Inc. has the following balance sheet, with negative owners equity. Are they solvent? Why or why not? [Hint: identify elements of the balance sheet that indicate they are solvent, and ones which indicate trouble]

ASSETS

Cash

$5,000

Receivables

$60,000

Inventories

$70,000

Total Current Assets

$135,000

Gross Property, Plant & Equipment

$205,000

Less Accum Deprec

$28,000

Net Plant & Equip

$177,000

Total Assets

$312,000

LIABILITIES & EQUITY

Accts Payable

$47,000

S/T bank loan

$40,000

Accrued liabilities

$8,000

Total Current Liabilities

$95,000

Long-term debt

$267,000

Paid-In Capital

$100,000

Retained Earnings

$(150,000)

Total Owners' equity

$(50,000)

Total Liab & O.E.

$312,000

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