7) On June 30, Hanson Company purchased a building for $600,000. The company made a cash payment of $200,000 and signed a twenty-year, 8% mortgage note payable for the remainder. Payments of $40,000 are made every June 30 and December 31. The building has a useful life of twenty years and a residual value of $100,000. Hanson uses the straight-line depreciation method and prepares its adjusting entries on an annual basis. Journalize the June 30 transactions, any annual adjusting entries for December 31, and the mortgage payment on December 31.
8) Identify the classification error in the following partial Balance Sheet for Aztec Industries and determine the impact on the current ratio.
Aztec Industries
Balance Sheet-Partial
Current Liabilities
Salaries Payable
$8,400
Payroll Taxes Payable
2,100
Estimated Warranty Payable
3,200
Unearned Revenue
2,500
Total Current Liabilities
16,200
Long-Term Debt
Accounts Payable
2,300
Mortgage Payable
60,000
Lease Payable
35,000
Total Long-Term Debt
97,300
Total Liabilities
$113,500
9) Classify the following accounts, which were included in Aztec Company's December 31st trial balance, and calculate the company's current ratio and debt ratio. The note is payable in equal installments of principal over each of the four years.
$18,500
Accounts Receivable
38,000
Cash
7,500
HST Payable
1,600
Inventory
22,000
Note Payable
(4-year note payable)
20,000
Prepaid Expenses
1,200
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