26) Please refer to the following information and compute the current ratio:
|
Debit
|
Credit
|
Cash
|
$4,500
|
|
Accounts receivable
|
1,200
|
|
Prepaid rent
|
700
|
|
Land
|
20,000
|
|
Equipment
|
4,000
|
|
Accumulated depreciation-equipment
|
|
$800
|
Accounts payable
|
|
2,900
|
Salary payable
|
|
600
|
Notes payable-long term
|
|
9,000
|
A) 1.83
B) 0.55
C) 0.51
D) 0.42
27) Please refer to the following information and compute the debt.
|
Debit
|
Credit
|
Cash
|
$4,500
|
|
Accounts receivable
|
1,200
|
|
Prepaid rent
|
700
|
|
Land
|
20,000
|
|
Equipment
|
4,000
|
|
Accumulated depreciation-equipment
|
|
$800
|
Accounts payable
|
|
2,900
|
Salary payable
|
|
600
|
Notes payable-long term
|
|
9,000
|
A) 1.83
B) 2.37
C) 0.40
D) 0.42
28) Please refer to the following information and calculate the current ratio:
|
Debit
|
Credit
|
Cash
|
$6,000
|
|
Accounts receivable
|
2,000
|
|
Prepaid insurance
|
800
|
|
Land
|
40,000
|
|
Building
|
50,000
|
|
Accumulated depreciation-building
|
|
$32,000
|
Accounts payable
|
|
9,400
|
Wages payable
|
|
4,000
|
Notes payable-short term
|
|
3,200
|
A) 0.25
B) 1.89
C) 0.53
D) 4.02
29) Please refer to the following information and calculate the debt ratio:
|
Debit
|
Credit
|
Cash
|
$6,000
|
|
Accounts receivable
|
2,000
|
|
Prepaid insurance
|
800
|
|
Land
|
40,000
|
|
Building
|
50,000
|
|
Accumulated depreciation-building
|
|
$32,000
|
Accounts payable
|
|
9,400
|
Wages payable
|
|
4,000
|
Notes payable-short term
|
|
3,200
|
A) 0.25
B) 1.89
C) 0.53
D) 4.02
30) Please refer to the following data:
|
Debit
|
Credit
|
Cash
|
$16,000
|
|
Accounts receivable
|
2,800
|
|
Prepaid insurance
|
800
|
|
Land
|
40,000
|
|
Building
|
50,000
|
|
Accumulated depreciation-building
|
|
$32,000
|
Accounts payable
|
|
2,200
|
Wages payable
|
|
4,000
|
Notes payable-short term
|
|
2,300
|
Using the "rule of thumb" guidelines, what conclusion could you draw?
A) This business faces a liquidity problem and may have trouble paying off its current liabilities with its current assets.
B) This business has does not have enough total assets to meet its total obligations.
C) This business has a very good current ratio, but the debt ratio indicates long-term liquidity problems.
D) This business should have no difficulties paying off its liabilities.
Learning Objective 4-7
1) Reversing entries are required by GAAP.
2) Reversing entries are used for convenience and to save time.
3) Reversing entries are posted on the first day of the month.
4) Which of the following statements is FALSE concerning reversing entries?
A) They are not required by GAAP.
B) They are used for convenience and to save time.
C) The reversing entry is exactly the opposite of a prior adjusting entry.
D) The reversing entry is posted on the last day of the month.
5) On December 31, Axle Services posted the following accrual adjustment:
Salary expense
|
1,000
|
|
Salary payable
|
|
1,000
|
Axle uses reversing entries. What reversing entry would be needed on January 1?
6) Better Advice, a service company uses reversing entries. On March 31, they posted the following adjusting entry to accrue utility expenses:
Utility expense
|
650
|
|
Accounts payable
|
|
650
|
Which of the following represents the proper reversing entry to be posted on April 1?
A)
Accounts payable
|
650
|
|
Utility expense
|
|
650
|
B)
Utility expense
|
650
|
|
Accounts payable
|
|
650
|
C)
Cash
|
650
|
|
Utility expense
|
|
650
|
D)
Utility expense
|
650
|
|
Accounts receivable
|
|
650
|
7) Charlton Cleaning Services pays out wages every week on Friday afternoon. Payroll expense totals $3,500 per week, based on a 5-day week. The month of June ended on a Thursday. On Thursday, June 30, Charlton made the following accrual adjustment:
Wage expense
|
2,800
|
|
Wage payable
|
|
2,800
|
At the same time, they prepared the following reversing entry to be booked on July 1:
Wage payable
|
2,800
|
|
Wage expense
|
|
2,800
|
On Friday afternoon, when wages were paid out, what journal entry was made?