Can someone help me with this. Financial Accounting Tools for Business Decision
ID: 2421061 • Letter: C
Question
Can someone help me with this. Financial Accounting Tools for Business Decision Making, 6th edition. kimmel, weygandt, kieso. Comprehensive Case: Chapters 1-4. page 219.
At June 30, 2015, the end of its most recent fiscal year, Red River Computer Consultants Ltd's post-closing trial balance was as follows:
The company underwent a major expansion in July. New staff was hired and more financing was obtained. Red River conducted the following transactions during July 2015, and adjusts its accounts monthly.
July 2. Issued $50,000 of common shares for cash.
3. Purchased liability insurance coverage for a year, $3,600.
3. Paid the first two (July and August 2015) months' rent for an annual lease of office space for $4,000 per month. (Hint: Use the Prepaid Rent account.)
6. Purchased $3,800 of supplies for cash.
7. Purchased equipment, paying $4,000 cash and signing a two-year bank loan for $20,000. The equipment has a four-year useful life. The bank loan has a 6% interest rate which is payable on the first day of each following month.
9. Visited client offices and agreed on the terms of a consulting project. Red River will invoice the client, Connor Productions, on the 20th of each month for worked performed.
10. Collected $1,200 on account from Milani Brothers Ltd. This client was invoiced in June when the service was provided to them.
13. Completed services or Fitzgerald Enterprises. This client paid $2,120 in advance last month. All services relating to this payment are now completed. (Hint: Use the Fees Earned account.)
14. Paid a utility bill of $400. This related to June utilities that were accrued at the end of June.
16. Met with a new client, Thunder Bay Technologies. Received $12,000 cash in advance for future work to be performed.
18. Paid semi-monthly salaries for $11,000.
20. Invoiced Connor Productions for $28,000 of consulting fees provided on account. (Hint: Use the Fees Earned account.)
20. Received a note for legal advice, $2,200. The amount is not due until August 15. (Hint: Use the Professional Fees Expense account.)
23. Completed the first phase of the project for Thunder Bay Technologies. Recognized $10,000 of revenue from the cash advance previously received (see July 16 transaction).
27. Received $15,000 cash from Connor Productions in partial payment of the invoice issued on July 20.
31. Prepared adjusting entries for the following:
Expiry of insurance coverage (see July 3 transaction.)
Adjustment of prepaid rent (see July 3 transaction.)
Supplies used, $1,250 (see July 6 transaction.)
Equipment depreciation (see July 7 transaction.)
Accrual of interests on bank loan (see July 7 transaction.)
Salaries for the second half of July, $11,000, to be paid on August 1
Estimated utilities expense for July, $800 (invoice to be received in August)
Income tax for July, $1,200, to be paid in August.
Instructions.
(a) Record the above transactions and adjusting journal entries.
(b) Prepare T accounts and post the general and adjusting journal entries.
(c) Prepare an adjusted trial balance as at July 31.
(d) Prepare (1) an income statement, (2) a statement of changes in equity, and (3) a statement of financial position.
(e) Prepare and post closing journal entries to the T accounts set up in part (b)
(f) Red Rives needs to maintain a current ratio of 2:5:1 in order to maintain its financial standing with its bankers. Calculate the current ratio. Has it achieved the 2.5-to-1 benchmark
DEBIT CREDIT Cash $5,230 Accounts Receivable 1,200 Supplies 690 Accounts Payable $ 400 Unearned Revenue 1,120 Common Shares 3,600 Retained Earnings 2,000 $7,120 $7,120Explanation / Answer
Answer : Jounal Enteries
T Accounts
Answer (c) Trial Balance as on July 31
Answer (d)
Answer (e)
Answer F Current ratio
Current Ratio = Current Assets/Current Liabilities
= 76170/17300
= 4.40:1
Yes, It is achieved Bench mark.
Sl. No. Date Account Debit Credit 1 07/02 Cash 50000 Common Share 50000 2 07/03 Pre paid Insurance 3600 Cash 3600 3 07/03 Advance rent 8000 Cash 8000 4 07/06 Supplies 3800 Cash 3800 5 07/07 Equipment 24000 Cash 4000 Bank Loan 20000 6 07/10 Cash 1200 Account Receivable (Milani Brothers) 1200 7 07/13 Unearned Revenue (Fitzgerald Enterprises) 1120 Fee earned account 1120 8 07/14 Expenses Payable 400 Cash 400 9 07/16 Cash 12000 Unearned Revenue (Thunder Bay Technology) 12000 10 07/18 Salaries 11000 Cash 11000 11 07/20 Account Receivable (Conor Production) 28000 Fee earned account 28000 12 07/20 Professional Fee Exp. Account 2200 Expenses Payable 2200 13 07/23 Unearned Revenue (Thunder Bay Technology) 10000 Fee earned account 10000 14 07/27 Cash 15000 Account Receivable (Conor Production) 15000 15 07/31 Insurance Exp. 300 Prepaid Insurance 300 16 07/31 Rent 4000 Advance rent 4000 17 07/31 Supplies Used 1250 Supplies 1250 18 07/31 Depreciation 500 Equipment 500 19 07/31 Interest Exp. 100 Expenses Payable 100 20 07/31 Salaries 11000 Expenses Payable 11000 21 07/31 Utilities Expenses 800 Expenses Payable 800 22 07/31 Income Tax 1200 Expenses Payable 1200