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Unformatted text preview: Capital: Current Ratio: Quick Ratio: Download free eBooks at bookboon.com 27 Problem 5: Solution Accounting Cycle Exercises IV Solution 5 Current Assets Accumulated Depreciation Quick Assets Current Liabilities R 7,995,750 Prepaid Rent 80,150 Note Payable (due in 3 months) 175,000 Accounts Receivable 819,000 R 80,150 Accounts Payable R 175,000 819,000 R 819,000 446,250 446,250 Patent 5,250,000 Cash 1,382,500 1,382,500 235,900 235,900 Supplies Unearned Revenues 1,382,500 232,750 Equipment 232,750 15,360,800 Interest Payable 78,750 Loan Payable (due in 3 years) 78,750 2,625,000 R 2,517,550 R 2,201,500 R 932,750 Working Capital: Current assets R 2,517,550 Less: Current liabilities 932,750 R 1,584,800 Current Ratio: Current assets ÷ Current liabilities R 2,517,550 ÷ R 932,750 = 2.70 Quick Ratio: Quick assets ÷ Current liabilities R 2,201,500 ÷ R 932,750 = 2.36 The ratios do not seem to indicate a liquidity problem. Current assets are almost 3X current liabilities, and a large portion of those assets are in highly liquid items such as cash and receivables. Download free eBooks at bookboon.com 28 Problem 6 Accounting Cycle Exercises IV Problem 6 McComick Corporation prepared the following preliminary trial balance. The trial balance and other information was evaluated by Darren Anderson, CPA. Darren has returned a list of proposed adjustments that are necessary to facilitate preparation of correct financial statements for the year ending December 31, 20X8. McCORMICK CORPORATION Trial Balance As of December 31, 20X8 Debits Cash $ Accounts Receivable Credits 91,620 $ - 135,000 21,000 Supplies Equipment - 733,500 - Accumulated Deprec. - 139,500 Accounts Payable - 38,100 Unearned Revenue - 93,750 Notes Payable - 240,000 Capital Stock - 300,000 Retained Earnings, Jan. 1 - 189,600 Dividends 36,000 - Revenues - 869,400 643,800 - 26,100 - Wages Expense Utilities Expenses 124,830 - Depreciation Expenses Selling Expenses 36,000 - Interest expense 22,500 - $ 1,870,350 $ 1,870,350 Download free eBooks at bookboon.com 29 Problem 6: Worksheet Accounting Cycle Exercises IV Worksheet 6 (a) GENERAL JOURNAL Please click the advert Date Accounts Debit Credit Find your next education here! Click here bookboon.com/blog/subsites/stafford Download free eBooks at bookboon.com 30 Problem 6: Worksheet Accounting Cycle Exercises IV Worksheet 6 (b) McCORMICK CORPORATION Worksheet for Adjusted Trial Balance December 31, 20X8 Debits $ Cash Accounts Receivable Debits 91,620 $ Debits - $ Debits - $ Debits - $ Debits - $ - 135,000 - - - - - - - - - 733,500 Equipment - 21,000 Supplies - - - - - Accumulated Deprec. - 139,500 - - - - Accounts Payable - 38,100 - - - - Utilities Payable - - - - - - Wages Payable - - - - - - Unearned Revenue - 93,750 - - - - Notes Payable - 240,000 - - - - Capital Stock - 300,000 - - - - Retained Earnings, Jan. 1 - 189,600 - - - - Dividends 36,000 - - - - - Revenues - 869,400 - - - - 643,800 - - - - - Wages Expense Utilities Expense 26,100 - - - - - Selling Expens...
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This document was uploaded on 09/24/2013.

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