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Q18E

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Horngren'S Financial And Managerial Accounting
Found in: Page 222

Short Answer

The adjusted trial balance of Melanie O’Mallie Dance Studio Company follows:MELANIE O'MALLIE DANCE STUDIO COMPANY Trial Balance August 31, 2018 Account Title Prepaid Rent Cash Debit Credit Office Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Salaries Payable Unearned Revenue Notes Payable (long-term) Dividends Common Stock Retained Earnings Service Revenue Salaries Expense Rent Expense Depreciation Expense—Equipment Supplies Expense Utilities Expense Balance $ 16,000 $ 76,100 $ 76,100 100 $ 5,700 4,800 49,000 5,400 18,100 5,000 18,000 19,000 1,100 1,100 3,600 1,800 1,500 500 400 1,100 Requirements 1. Prepare the classified balance sheet of Melanie O’Mallie Dance Studio Company at August 31, 2018. Use the report form. You must compute the ending balance of Retained Earnings. 2. Compute O’Mallie’s current ratio at August 31, 2018. One year ago, the current ratio was 1.76. Indicate whether O’Mallie’s ability to pay current debts has improved, deteriorated, or remained the same.

(1) Balance Sheet is shown as follows:

MELANIE O'MALLIE DANCE STUDIO COMPANY

Balance Sheet

August 31, 2018

Assets

Current Assets:

Cash

$16,000

Office Supplies

1,800

Prepaid Rent

1,500

Total Current Assets

$19,300

Property, Plant, and Equipment:

Equipment

$49,000

Less: Accumulated Depreciation- Equipment

(5,700)

43,300

Total Property, Plant, and Equipment:

43,300

Total Assets

$62,600

Liabilities

Current Liabilities:

Accounts Payable

$4,800

Salaries Payable

100

Unearned Revenue

5,000

Total Current Liabilities:

$9,900

Long term Liabilities

Notes Payable

5,400

Total Long-term Liabilities

5,400

Total Liabilities

$15,300

Stockholders’ Equity

Common Stock

18,000

Retained Earnings

29,300

Total Stockholders’ Equity

47,300

Total Liabilities and Stockholders’ Equity

$62,600

(2) Current ratio has improved, as it gets increased from 1.76 times to 1.95 times.

See the step by step solution

Step by Step Solution

Step 1: Calculation of Net Income

Net income is calculated as follows

Step 2: Calculation of Ending Balance of Retained Earnings

Statement of retained earnings is shown as follows:

MELANIE O'MALLIE DANCE STUDIO COMPANY

Statement of Retained Earnings

Year Ended August 31, 2018

Retained Earnings, Beginning Balance

$19,000

Net income for the year

11,400

30,400

Dividends

(1,100)

Retained Earnings, Ending Balance

$29,300

Step 3: Calculation of Current Ratio

Current ratio is calculated as follows:

Most popular questions for Business-studies Textbooks

Murphy Delivery Service completed the following transactions during December 2018: Dec. 1 Murphy Delivery Service began operations by receiving $13,000 cash and a truck with a fair value of $9,000 from Russ Murphy. The business issued Murphy shares of common stock in exchange for this contribution. 1 Paid $600 cash for a six-month insurance policy. The policy begins December 1. 4 Paid $750 cash for office supplies. 12 Performed delivery services for a customer and received $2,200 cash. 15 Completed a large delivery job, billed the customer, $3,300, and received a promise to collect the $3,300 within one week. 18 Paid employee salary, $800. 20 Received $7,000 cash for performing delivery services. 22 Collected $2,200 in advance for delivery service to be performed later. 25 Collected $3,300 cash from customer on account. 27 Purchased fuel for the truck, paying $150 on account. (Credit Accounts Payable) 28 Performed delivery services on account, $1,400. 29 Paid office rent, $1,400, for the month of December. 30 Paid $150 on account. 31 Cash dividends of $2,500 were paid to stockholders. Requirements

1. Record each transaction in the journal using the following chart of accounts. Explanations are not required. Cash Retained Earnings Accounts Receivable Dividends Office Supplies Income Summary Prepaid Insurance Service Revenue Truck Salaries Expense Accumulated Depreciation—Truck Depreciation Expense—Truck Accounts Payable Insurance Expense Salaries Payable Fuel Expense Unearned Revenue Rent Expense Common Stock Supplies Expense

2. Post the transactions in the T-accounts.

3. Prepare an unadjusted trial balance as of December 31, 2018.

4. Prepare a worksheet as of December 31, 2018 (optional).

5. Journalize the adjusting entries using the following adjustment data and also by reviewing the journal entries prepared in Requirement 1. Post adjusting entries to the T-accounts. CHAPTER 4 Completing the Accounting Cycle 245 Adjustment data: a. Accrued Salaries Expense, $800. b. Depreciation was recorded on the truck using the straight-line method. Assume a useful life of five years and a salvage value of $3,000. c. Prepaid Insurance for the month has expired. d. Office Supplies on hand, $450. e. Unearned Revenue earned during the month, $700. f. Accrued Service Revenue, $450.

6. Prepare an adjusted trial balance as of December 31, 2018.

7. Prepare Murphy Delivery Service’s income statement and statement of retained earnings for the month ended December 31, 2018, and the classified balance sheet on that date. On the income statement, list expenses in decreasing order by amount—that is, the largest expense first, the smallest expense last.

8. Journalize the closing entries, and post to the T-accounts.

9. Prepare a post-closing trial balance as of December 31, 2018.

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