Question 1

The current ratio measures a company's ________.

Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to pay its current liabilities with its current assets. It shows the proportion of current assets that are available to cover each dollar of current liabilities. A higher current ratio indicates a better ability to meet short-term obligations.

Question 2

A reversing entry is ________.

Accepted Answer

A reversing entry is a special type of journal entry that is prepared at the beginning of the next accounting period to reverse the effect of certain adjusting entries made in the previous period. This eases the burden of accounting for transactions in the new period by eliminating the need to remember to reverse the original entry manually. Reversing entries are typically used for accruals and deferrals.

Question 3

Perry Service Company had the following unadjusted balances at December 31,2018: Salaries Payable,$0; Salaries Expense,$12,000.The following transactions took place on December 31,2018:
Accrued Salaries Expense,$5,000
Closed the Salaries Expense account.
The following transaction took place on January 4,2019:
Paid salaries of $6,000.This payment included $5,000 that was accrued on December 31,2018 and $1,000 for the first few days in January 2019.
Prepare the journal entry for January 4,2019,assuming that reversing entries were not made.Omit explanation.

Accepted Answer

The answer of Perry Service Company had the following unadjusted...

Question 4

A company has $120,000 in current assets; $550,000 in total assets; $90,000 in current liabilities,and $110,000 in total liabilities.Calculate the current ratio of the company.(Round your answer to two decimal places.)

Accepted Answer

A) Current ratio = Total current assets / Total current liabilities
Current ratio = $120,000 / $90,000 = 1.33

Question 5

Reversing entries are special journal entries that ease the burden of accounting for transactions in a later period.

Accepted Answer

Reversing entries are indeed special journal entries that are created at the beginning of a new accounting period to facilitate the recognition of certain transactions that occurred in the previous period. These entries are meant to simplify the reversal of adjusting entries, which are created at the end of a period to correct accounts and prepare financial statements. By reversing these adjusting entries, the accounts are returned to their original state, which makes it easier to record and track transactions in the new period.

Question 6

Calculate the current ratio using the following information: (Round your answer to two decimal places.) $$\begin{array} { l l } 
\text { Cash } & \$ 6,000 \
\text { Accounts Receivable } & 1,300 \
\text { Prepaid Rent } & 1,100 \
\text { Larid } & 20,000 \
\text { Equipment } & 4,000 \
\text { Accurnulated Depreciation } & 1,200 \
\text { Accounts Payable } & 3,000 \
\text { Salaries Payable } & 1,000 \
\text { Notes Payable-long term } & 9,000
\end{array}$$

Accepted Answer

Current assets = $6,000 + $1,300 + $1,100 = $8,400Current liabilities = $3,000 + $1,000 = $4,000Current ratio = $8,400 / $4,000 = 2.10

Question 7

The following contains information from the records of the Becker Architecture Firm. $\begin{array}{c}
\text {Becker Architecture Firm}\
\text { Selected Financial Information}\
\text {December 31,2019}\
\begin{array}{|l|r|}
\hline \text { Current Assets } & \$ 90,000 \
\hline \text { Current Liabilities } & 30,000 \
\hline \text { Long-Term Assets } & 11,000 \
\hline \text { Long-Term Liabilities } & 65,000 \
\hline \text { Total Revenues } & 50,000 \
\hline \text { Total Expenses } & 34,000\
\hline 
\end{array}
\end{array}$ Which of the following statements is an accurate interpretation of the current ratio of the Becker Architecture Firm? (Round your answer to two decimal places.)

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities, which is $90,000 / $30,000 = 3. This means the company has $3.00 of current assets for every $1.00 of current liabilities.

Question 8

The following contains information from the records of Bourne Engineers and Architects. $$ \begin{array} { c } 
\text { Bourne Engineers and Architects } \
\text { Selected Finarncial Information } \
\text { Decermber 31, 2019 }\
\begin{array} {| l | r| } 
\hline \text { Current Assets } & \$ 70,000 \
\hline \text { Current Liabilities } & 35,000 \
\hline \text { Long-Term Assets } & 97,000\
\hline \text { Long-Term Liabilities } & 63,000\
\hline \text { Total Revenues } & 55,000 \
\hline \text { Total Expenses } & 36,000\
\hline
\end{array}\end{array}$$  Calculate the current ratio.(Round your answer to two decimal places.)

Accepted Answer

The answer of The following contains information from the records...

Question 9

Wilson Engraving just completed operations for the year ending December 31,2018.Accounts from the adjusted trial balance dated December 31,2018 are listed in alphabetical order below:
  Requirement:
a.Prepare the closing entries.Omit explanations.
b.Prepare,in good form,the income statement,statement of owner's equity,and balance sheet.There were no new capital contributions during the year.
c.Compute the current ratio.Label your work.Comment on the current ratio.

Accepted Answer

The answer of Wilson Engraving just completed operations for the...

Question 10

Generally Accepted Accounting Principles (GAAP)require every organization to prepare reversing entries.

Accepted Answer

Generally Accepted Accounting Principles (GAAP) do not require reversing entries.

Question 11

Which of the following statements is an accurate interpretation of the current ratio?

Accepted Answer

A current ratio of 2.0 indicates a company has twice as many current assets as current liabilities, which is generally considered a strong ability to pay current liabilities. Option A is incorrect because a current ratio of 1.5 or higher is generally considered a safe ratio. Option B is incorrect because a current ratio below 1.00 may indicate that a company has more current liabilities than current assets and may have difficulty paying its short-term obligations. Option D is also incorrect because a current ratio of 0.60 or lower is generally considered a low ratio and may indicate financial difficulty for a company.

Question 12

Brownstone Company has a current ratio of 4.00.This indicates that the company has $4 in ________.

Accepted Answer

Current ratio is calculated by dividing current assets by current liabilities. Therefore, a current ratio of 4.00 indicates that the company has $4 in current assets for every $1 of current liabilities.

Question 13

The current ratio measures ________.

Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to pay off its current liabilities using its current assets. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates that a company has more current assets relative to its current liabilities, which means it is better positioned to meet its short-term obligations. Option A, B, and D are incorrect because the current ratio does not measure a company's ability to sell its long-term assets or its profitability during a particular period.

Question 14

Reversing entries are used in conjunction with ________.

Accepted Answer

Reversing entries are used in conjunction with accrual-type adjustments. These entries are made at the beginning of an accounting period to reverse the effect of certain adjusting entries that were made at the end of the previous accounting period. This ensures that the correct amounts are recorded in the current period and that the financial statements accurately reflect the company's financial position. Reversing entries are not typically used with deferred revenues, deferred expenses, unearned revenue, or prepaid rent.

Question 15

An increase in the current ratio implies that the profitability of the company has increased from the previous period.

Accepted Answer

A current ratio that has increased from the prior period indicates an improvement in the company's ability to pay its current debts.

Question 16

Answer the following questions regarding the current ratio:
 $$\begin{array} { | l | l | } 
\hline \text { Current Ratio Question } & \text { Answer } \
\hline \text { What does the current } & \
\text { ratio measure? } & \
\hline \text { How is the current ratio } & \
\text { calculated? } & \
\hline \text { When analyzing the } & \
\text { current ratio, what is the } & \
\text { rule of thumb? }\
\hline 
\end{array}$$

Accepted Answer

The answer of Answer the following questions regarding the current...

Question 17

The following information is provided for Journey Company and Mastery Company.Both companies provide training materials for electricians.
 $$\begin{array} { | l | c | c | } 
\hline \text { Company } & 2018 & 2019 \
\hline \text { Tourney Company's Current Ratio } & 1.8 & 1.2 \
\hline \text { Mastery Company's Current Ratio } & .8 & 1.4 \
\hline
\end{array}$$ a.Which company has the stronger current ratio for 2018 and 2019? Defend your answer.
b.Discuss the change in current ratio for each company.

Accepted Answer

The answer of The following information is provided for Journey...

Question 18

Pioneer's adjusted trial balance as of December 31,2018 is given below:  Compute the current ratio.(Round your answer to two decimal places.)

Accepted Answer

The answer of Pioneer's adjusted trial balance as of December...

Question 19

Which of the following would be considered the weakest current ratio?

Accepted Answer

A current ratio of 0.35 indicates that a company may have difficulty meeting its short-term obligations and may be at risk of defaulting on its debts. A current ratio of 1.00 or higher is generally considered to be a good indication of a company's ability to meet its short-term liabilities.

Question 20

The formula for computing the current ratio is ________.

Accepted Answer

The formula for computing the current ratio is Total Current assets divided by Total Current liabilities. This is because the current ratio measures a company's ability to pay off its short-term obligations using its current assets. Therefore, the correct formula is D) Current ratio = Total Current assets / Total Current liabilities.

Quiz 4: Completing the Accounting Cycle