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Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
Edition 4ISBN: 978-0078025372 Exercise 68
Analyzing and Recording Transactions, and Preparing and Evaluating a Balance Sheet
Business Sim Corp. (BSC) issued 1,000 common shares to Kelly in exchange for $12,000. BSC borrowed $30,000 from the bank, promising to repay it in two years. BSC paid $35,000 for computer equipment with check number 101 and signed a note for $5,000 due in six months. BSC received $900 of supplies purchased on account. BSC's loan contains a clause ("covenant") that requires BSC to maintain a ratio of current assets to current liabilities of at least 1.3.
Required:
1. Identify the transactions and analyze their accounting equation effects, using the format shown in the chapter.
2. Prepare journal entries for the transactions described above and post them to T-accounts.
3. Assuming BSC entered into no other activities during its first year ended September 30, prepare the company's classified balance sheet. Include a balance of zero in Retained Earnings.
4. Determine and explain whether BSC is complying with or violating its loan covenant.
Business Sim Corp. (BSC) issued 1,000 common shares to Kelly in exchange for $12,000. BSC borrowed $30,000 from the bank, promising to repay it in two years. BSC paid $35,000 for computer equipment with check number 101 and signed a note for $5,000 due in six months. BSC received $900 of supplies purchased on account. BSC's loan contains a clause ("covenant") that requires BSC to maintain a ratio of current assets to current liabilities of at least 1.3.
Required:
1. Identify the transactions and analyze their accounting equation effects, using the format shown in the chapter.
2. Prepare journal entries for the transactions described above and post them to T-accounts.
3. Assuming BSC entered into no other activities during its first year ended September 30, prepare the company's classified balance sheet. Include a balance of zero in Retained Earnings.
4. Determine and explain whether BSC is complying with or violating its loan covenant.
Explanation
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Verified
1.
Accounting equation: This is the equa...
Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby
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