Chapter 2: Q17RQ (page 90)
What is the calculation for the debt ratio? Explain what the debt ratio evaluates.
The debt ratio is calculated by dividing liabilities by total assets and it evaluates the ability of the company to pay its debt.
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Question:Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance The following transactions occurred during the month for Teresa Parker, CPA:
Jun. 1 Parker opened an accounting firm by contributing \(13,200 cash and office furniture with a fair market value of \)5,300 in exchange for common stock.
5 Paid monthly rent of \(1,300.
9 Purchased office supplies on account, \)600.
14 Paid employee’s salary, \(1,900.
18 Received a bill for utilities to be paid next month, \)370.
21 Paid \(500 of the accounts payable created on June 9.
25 Performed accounting services on account, \)5,700.
28 Paid cash dividends of $6,700
Requirements 3. Prepare the trial balance as of June 30, 2018
Journalizing transactions, posting journal entries to four-column accounts, and preparing a trial balance
Terrence Murphy opened a law office on January 1, 2018. During the first month of operations, the business completed the following transactions:
Jan. 1 Murphy contributed \(78,000 cash to the business, Terrence Murphy, Attorney. The business issued common stock to Murphy.
3 Purchased office supplies, \)600, and furniture, \(1,700, on account.
4 Performed legal services for a client and received \)1,000 cash.
7 Purchased a building with a market value of \(130,000, and land with a market value of \)25,000. The business paid \(25,000 cash and signed a note payable to the bank for the remaining amount.
11 Prepared legal documents for a client on account, \)400.
15 Paid assistant’s semimonthly salary, \(1,120.
16 Paid for the office supplies purchased on January 3 on account.
18 Received \)2,700 cash for helping a client sell real estate.
19 Defended a client in court and billed the client for \(1,800.
25 Received a bill for utilities, \)600. The bill will be paid next month.
29 Received cash on account, \(1,500.
30 Paid \)1,200 cash for a 12-month insurance policy starting on February 1.
30 Paid assistant’s semimonthly salary, \(1,120.
31 Paid monthly rent expense, \)1,800.
31 Paid cash dividends of $2,200.
Requirements
4. Prepare the trial balance of Terrence Murphy, Attorney, at January 31, 2018.
Question:The accounts of Anderson Moving Company follow with their normal balances as of August 31, 2018. The accounts are listed in no particular order. Common Stock \( 49,800 Trucks \) 123,000 Insurance Expense 600 Fuel Expense 1,000 Accounts Payable 4,000 Dividends 5,600 Service Revenue 82,000 Utilities Expense 300 Building 41,000 Accounts Receivable 10,000 Advertising Expense 200 Notes Payable 56,000 Salaries Expense 6,000 Office Supplies 100 Cash 4,000 Prepare Anderson’s trial balance as of August 31, 2018.
Identify the three categories of the accounting equation, and list at least four accounts associated with each category.
Using the following accounts and their balances, calculate the debt ratio for Cooper Furniture Repair as of December 31.
Cash \( 7,000 Advertising Expense \) 1,200
Unearned Revenue 4,500 Utilities Expense 800
Equipment 10,000 Rent Expense 5,000
Service Revenue 8,000 Accounts Payable 2,300
Common Stock 12,200 Dividends 3,000
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