25) Following is the adjusted trial balance for Simcoe Fishing Cabin:
Debit |
Credit |
|
Cash |
$6,000 |
|
Accounts receivable |
2,000 |
|
Prepaid insurance |
800 |
|
Land |
40,000 |
|
Building |
50,000 |
|
Accumulated amortization |
$32,000 |
|
Accounts payable |
9,400 |
|
Wages payable |
4,000 |
|
Notes payable—short term |
3,200 |
Calculate the current ratio and the debt ratio, then comment on the firms liquidity and capital structure.
26) Given the following adjusted trial balance for Leighton Industries, prepare a postclosing trial balance dated December 31, 2014.
Leighton Industries
Adjusted Trial Balance
December 31, 2014
DebitCredit
Cash$ 13,000
Accounts receivable7,000
Prepaid rent3,000
Prepaid insurance3,500
Supplies3,300
Land32,000
Building55,000
Accumulated amort.-building$ 12,000
Equipment36,000
Accumulated amort.-equipment9,000
Accounts payable8,000
Salary payable2,000
Interest payable2,500
Mortgage payable (due 12/31/2019)55,000
Leane Leighton, Capital70,500
Leane Leighton, Withdrawals25,000
Service revenue96,000
Salary expense34,000
Insurance expense1,200
Rent expense1,800
Utilities expense16,000
Advertising expense2,000
Amortization expense-building11,000
Amortization expense-equipment10,000
Supplies expense 1,200________
Total$255,000$255,000
Calculate the current ratio and the debt ratio for Leighton Industries. Explain what these two ratios measure and whether it is usually preferable to have a higher or lower ratio for each.
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