Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem 3.64AP
LO 5
P3-63A (Learning Objective 5: Close the books, and evaluate retained earnings) The accounts of Valley Services. Inc., at January 31, 2018, are listed in alphabetical order.
Accounts payable………………… | $14,000 | Interest expense…............... | $ 400 |
Accounts receivable....................... | 5,000 | Note payable, long term….. | 15,400 |
7,000 | Other assets long-term……. | 14,400 | |
Prepaid expenses…………. | 6,600 | ||
Advertising expense……………………. | 10,800 | Retained earnings, January 31, 2017…………………… | 13,600 |
Cash………………………………………. | 26,000 | Salary expense …………………………….. | 26,300 |
Common stock………………………….. | 4,500 | Salary payable……………. | 2,300 |
Current portion of long-term note payable…………………………………… | 1,000 | Service revenue…………… | 96,000 |
Depreciation expense—equipment | 2,100 | Supplies............. | 2,400 |
Dividends declared…………………………. | 15,000 | Supplies expense………….. | 4,500 |
Equipment.......................................................... | 43,000 | Unearned service revenue……. | 2,700 |
Requirements
- 1. All adjustments have been journalized and posted, but the closing entries have not yet been made. Journalize valley’s closing entries at January 31, 2018.
- 2. Set up a T-account for Retained Earnings and post to that account. Then calculate Valley’s net income for the year ended January 31, 2018. What is the ending balance of Retained Earnings?
- 3. Did Retained Earnings increase or decrease during the year? What caused the increase of the decrease?
LO 4, 6
P3-64A. (Learning Objectives 4, 6: Construct the financial statements; analyze and evaluate liquidity and debt-paying ability) Refer back to Problem 3-63A.
Requirements
- 1. Use the valley Services data in Problem 3-63A to prepare the company’s classified
balance sheet at January 31, 2018. Label total assets, total liabilities, and total liabilities and stockholder’s equity. - 2. Calculate Valley’s net
working capital ,current ratio , and debt ratio at January 31, 2018, rounding to two decimal places. At January 31, 2017, net working capital was $19,500, the current ratio was 1.80, and the debt ratio was 0.15. Did Valley’s ability to pay both current and total debts improve or deteriorate during the first year? Evaluate Valley’s debt position as strong or weak and give your reason.
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Chapter 3 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
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