Please answer this question and do steps 1-7. I\'ve already posted this question
ID: 2603537 • Letter: P
Question
Please answer this question and do steps 1-7. I've already posted this question and they did not complete the answer.
PB2-3 Recording Transactions (in a Journal and T-Accounts); Preparing and Interpreting the Balance
Sheet (LO 2-2, 2-3, 2-4, 2-5 and a little Chapter 1)
Starbuck$ is a coffee company – a big coffee company. During a 10-year period, the number of Starbucks locations grew from 165 to over 8,500 stores in 50 countries. The following is adapted from Starbucks’s annual report for the year ended September 30, 2017, and dollars are reported in millions.
Accounts Payable
$ 4,110
Inventory
$ 1,110
Accounts Receivable
560
Notes Payable
1,660
Cash
2,560
Prepaid Rent
570
Common Stock
350
Retained Earnings
4,140
Equipment
3,220
Salary and Wages Payable
1,270
Intangible Assets
2,850
Short-term Investments
660
Assume the following events occurred in the following quarter, which ended December 31, 2017. Dollars are in millions.
a.Paid $1,000 cash for additional intangible assets.
b.Issued additional shares of common stock for $10,000 in cash.
c.Purchased equipment; paid $4,000 in cash and signed additional long-term loans for $9,500.
d.Paid $800 cash for salaries and wages owed at September 30.
e.Conducted negotiations to purchase a coffee farm, which is expected to cost $8,400.
Required:
1.Analyze transactions (a)-(e) to determine their effects on the accounting equation. Once you have determined the effects on the accounting equation prepare a journal entry (Hint – debits first and credits second). Use the format shown below.
2.Post your journal entries in Part 1 above to the T-Accounts. Use the format shown below.
3.Carryforward account balances from Part 2 to the worksheet for Part 3 – show account balances, indicated account type (i.e. asset, liability, equity, revenue or expense), does the account have a debit or credit balance and which financial statement does this account appear on (i.e. Income Statement, Statement of Retained Earnings or Balance Sheet)?
4.Prepare a Trial Balance at 12/31/2017.
5.Prepare an Income Statement, Statement of Retained Earnings and a classified Balance Sheet.
6.What was the source of the company’s financing – Debt or Equity – show your work?
7.Prepare the Current Ratio and the Quick Ratio (aka Acid Test). Are the ratios good or bad? What standard did you use?
Accounts Payable
$ 4,110
Inventory
$ 1,110
Accounts Receivable
560
Notes Payable
1,660
Cash
2,560
Prepaid Rent
570
Common Stock
350
Retained Earnings
4,140
Equipment
3,220
Salary and Wages Payable
1,270
Intangible Assets
2,850
Short-term Investments
660
Explanation / Answer
1. Effect on Accounting Equation of transaction from a to e -
Journal Entry
2. T- Account of above journal entries
4. Trial Balance 31 Dec 2017
5. Income statement, Classified balance sheet and stat of retianed earning
Balance sheet
6. Source of company's financing
1. Common Stock = 350 $ + 10000 $
= 10350 $
2. Debt (Note payable) = 1660 $ + 9500 $
= 11160 $
7. Current Ratio = Current assets / Current liability
=6760 +660 + 560 + 1110 + 570 / 4110 + 470
= 9660 $ / 4580 $
= 2.11
Acid Ratio = Cash + A/c Rec. + Short term investment / Current liability
= 6760 + 560+ 660 / 4580
=7980 / 4580
= 1.74
Idle Current ratio which are accepted by bank is 1.33. Current ratio more than 1.5 is considered as company is not effectively utilizing its cash resources. Acid test ratio should be more than at least 1. These are considered as healthy ratio. Starbuck should maintain its Current ratio between 1 - 1.5.
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Accounting Equation Assets = Liability + Shareholder equity Transaction Cash Intangible Assets Equipment Account Payable Long term loan Equity a) -1000 1000 0 = 0 0 0 b) 10000 0 0 = 0 0 10000 c) -4000 0 13500 = 0 9500 0 d) -800 0 0 = -800 0 0 e) 0 0 0 = 0 0 0