1 of 2 o Chapeer 2 TakeHome Quiz The Sollowing information i

1 of 2 o Chapeer 2 Take-Home Quiz The Sollowing information is peovided for Everydhing OakInc at December 31, 2017 Everything Oak, In Adjusted Trial Balance December 31, 2017 Debit Credit (in thousands of dellars) Cash Accounts Receivable Interest Receivable Short-Term Investments Prepaid Expenses 500 9,750 12850 Plant, Property, & Equipment Accounts Payablk Accrued Wages Payable Dividends Payable Interest Payable Short-Term Notes Payable Long-Term Notes Payable Common stock ($.10 par value per share Additional Paid-ln Capital Retained Earnings 6700 3.300 1250 1500 1800 23,675 150 12600 7975 Everything Oak entered into the following transactions during January 2018 1. Issued 800 shares of common stock for $9.50 per sharc 2. Purchasod $1,650 worth of supplies on crodit 3 Collected $8,750 on outstanding accounts receivable 4. Paid out all dividends from December 2017 S. Declared a cash dividend of $750 6. Sigmed a contract to purchase S3,000 of eak materials frm a supplier in February 7. Purchased equipment for $1,500 cash and a $7.500 mote payable due 3/31/2019 8. Paid $4,750 of accounts payable 9. Sold short-term investments worth $8,000 for 58,00o 10. Paid $5,000 on a long-term noepus S400 of accrued mia 11. Purchasod insurance coverage for Febeuary 2018 to Jamary 2019 for $1,200 the joumal entry for each transaction a. Prepare b. Create T-accounts with boginning balances Post cach joumal entry to the appropeiate T c. Prepare a classified balance shects at Decembor 31, 2017 and January 31, 2018 in proper form d. Compute the current ratio at December 31,2017 and Jamuury 31, 2018 Has liquidity improved or deteriorated? Explain why it has impnoved or detcriorastod

Solution

a. Journal:

b. T accounts

c.

Classified balance sheet:

d. current ratio  

Dec 31 2017= 46350/14550= 3.19

Jan 31 2018= 42700/ 18050= 2.37

The liquidity has been deteriorated

Ref	Account		Debit	Credit
1 1	Cash		800
	Common stock			800
1 2	Cash		6,800
	Additional paid in capital			6,800
2	Supplies		1,650
	Accounts payable			1,650
3	Cash		8,750
	Accounts receivable			8,750
4	Dividends payable		1,250
	Cash			1,250
5	Retained earnings		750
	Dividends payable			750
7 1	Property, plant and equipment		1,500
	Cash			1,500
7 2	Property, plant and equipment		7,500
	Short term notes payable			7,500
8	Accounts payable		4,750
	Cash			4,750
9	Cash		8,000
	Short term investments			8,000
10-1	Long term notes payable		5,000
	Cash			5,000
10-2	Interest payable		400
	Cash			400
11	Prepaid expenses		1,200
	Cash			1,200