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Chapter 4: 4-20RQ (page 216)
What is the current ratio, and how is it calculated?
Current ratio is a measure which calculates the ability to repay the current liabilities by the current assets. It is calculated by dividing current assets by current liabilities.
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The unadjusted trial balance of Data Solution at November 30, 2018, follows: DATA SOLUTION Unadjusted Trial Balance November 30, 2018 Account Title Prepaid Rent Cash Debit Credit Accounts Receivable Office Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Common Stock Dividends Service Revenue Depreciation Expense—Equipment Salaries Expense Rent Expense Utilities Expense Supplies Expense Balance \( 4,400 \) 48,300 \( 48,300 5,100 \) 1,500 30,200 32,900 8,800 2,900 2,100 3,100 1,800 3,100 700 Additional information at November 30, 2018: a. Accrued Service Revenue, \(800. b. Depreciation, \)350. c. Accrued Salaries Expense, \(650. d. Prepaid Rent expired, \)700. e. Office Supplies used, $550. Requirements 1. Complete Data Solution’s worksheet for the month ended November 30, 2018. 2. How much was net income for November?
For each account listed, identify the category in which it would appear on a classified balance sheet.
2. Mortgage Payable (due in five years)
Cynthia Elmer, CPA, had the following partial worksheet:
Requirements
1. Complete the worksheet.
2. Prepare the closing entries for Cynthia Elmer, CPA.
Benson Auto Repair had the following account balances after adjustments. Assume all accounts had normal balances.
Cash \( 4,000 Common Stock \) 20,000
Accounts Receivable 3,200 Retained Earnings, January 1 15,700
Prepaid Rent 1,900 Dividends 2,100
Office Supplies 3,000 Service Revenue 1,600
Equipment 34,800 Depreciation Expense—Equipment 300
Accumulated Depreciation—Equipment 1,600 Salaries Expense 800
Accounts Payable 5,400 Rent Expense 500
Notes Payable (long-term) 7,000 Utilities Expense 600
Supplies Expense 100
14. Prepare the closing entries for Benson at December 31.
15. What is the balance of Retained Earnings after closing entries have been recorded? (Use a T-account to determine the balance.)
On December 1, Bob Waldo began an auto repair shop, Waldo’s Quality Automotive. The following transactions occurred during December: Dec. 1 Waldo contributed \(70,000 cash to the business in exchange for shares of common stock. 1 Purchased \)12,000 of equipment paying cash. 1 Paid \(1,750 for a five-month insurance policy starting on December 1. 9 Paid \)20,000 cash to purchase land to be used in operations. 10 Purchased office supplies on account, \(2,800. 19 Borrowed \)15,000 from the bank for business use. Waldo signed a note payable to the bank in the name of the corporation. The note is due in five years. 22 Paid \(1,300 for advertising expenses. 26 Paid \)900 on account. 28 The business received a bill for utilities to be paid in January, \(280. 31 Revenues earned during the month included \)16,000 cash and \(3,600 on account. 31 Paid employees’ salaries \)3,800 and building rent \(1,200. Record as a compound entry. 31 The business received \)1,440 for auto screening services to be performed next month. 31 Paid cash dividends of \(5,500 to stockholders. The business uses the following accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Land; Equipment; Accumulated Depreciation—Equipment; Accounts Payable; Utilities Payable; Interest Payable; Unearned Revenue; Notes Payable; Common Stock; Retained Earnings; Dividends; Income Summary; Service Revenue; Salaries Expense; Rent Expense; Utilities Expense; Advertising Expense; Supplies Expense; Insurance Expense; Interest Expense; and Depreciation Expense—Equipment. Adjustment data: a. Office Supplies used during the month, \)1,800. b. Depreciation for the month, \(200. c. One month insurance has expired. d. Accrued Interest Expense, \)75. Requirements 1. Prepare the journal entries, and post to the T-accounts. 2. Prepare an unadjusted trial balance. 3. Complete the worksheet for the month ended December 31, 2018 (optional). 4. Prepare the adjusting entries, and post to the T-accounts. 5. Prepare an adjusted trial balance.6. Prepare the income statement, the statement of retained earnings, and the classified balance sheet in report form. 7. Prepare the closing entries, and post to the T-accounts. 8. Prepare a post-closing trial balance.
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