Question

AP9-1

statement of financial position at December 31, GUIT. ALTERNATE PROBLEMS LO9-1,9-2,4-6 AP9-1 Exxon Mobil Corporation Recording and Reporting Current cording and Reporting Current Liabilities with Discussion of the Effects on the Quick Ratio (P9-1) computek Lid. completed the following transactions during 2018. The company's fiscal year ends on December 31, 2018 Jan. 8 Purchased on account merchandise for resale at a cost of $14,500, with ternis 2/10, 130 The company uses a periodic inventory system. 19 Paid the invoice received on January 8. Mar. 10 Sold merchandise on credit for a total amount or $11,300, which included GST at 5 percent and PST at 8 percent of the sales amount. Apr. 1 Borrowed $35,000 from the bank for general use: signed a 12-month, 6 percent interest bearing note June 3 Purchased merchandise for resale at a cost of $16,420. July 5 Paid the invoice received on June 3. Aug. I Rented a small office in a building owned by the company and collected $6,000 for six months' rent in advance. Ignore sales taxes. (Record the collection in a way that will not require an adjusting entry at year-end.) Dec. 20 Received a $100 refundable deposit from a customer as a guarantee to return a large trailer "borrowed for 30 days. 31 Determined that wages earned but not yet paid on December 31 amounted to $9,500. Ignore payroll taxes. Required: 1. Prepare the journal entry for each of these transactions 2. Prepare the adjusting entry (entries) required on December 31, 2018. 3. Show how all of the liabilities arising from these transactions are reported on the statement of financial position at December 31, 2018. 4. For each transaction and related adjusting entry, state whether the quick ratio increases, decreases, or remains the same. Assume that the quick ratio is less than 1.0 before considering each transaction. Brunswick Corporation L09-1 AP9-4 WestJet Airlines 104-1.4-6 AP9-2 Ltd. Determining Financial Effects of Transactions Aflecting Current Liabilities with Discussion of Cash Flow Effects (P9-2) Refer to the previous problem. Required: 1 For each transaction (including adjusting and reclassification entries), indicate the accounts affected, amounts, and direction of the effects (+ for increases and - for decreases) on the accounting equation. Use the following headings: Date Assets = Liabilities + Shareholders' Equity reased decreased

Answer 1

Requirement 1: Prepare the following journal entries

Date	Account Title and Explanation	Debit	Credit
Jan. 8	Purchases	$14,500
	Accounts Payable		$14,500
	To record merchandise inventory purchased on account
Jan. 19	Accounts Payable	$14,500
	Cash		$14,500
	To record cash paid on account
Mar. 10	Accounts Receivable	$12,769
	Sales Revenue		$11,300
	Sales Tax Payable ($11,300 × (5% + 8%))		$1,469
	To record sale of merchandise
Apr. 1	Cash	$35,000
	Notes Payable		$35,000
	To record notes payable
Jun. 3	Purchases	$16,420
	Accounts Payable		$16,420
	To record merchandise inventory purchased on account
Jul. 5	Accounts Payable	$16,420
	Cash		$16,420
	To record cash paid on account
Aug 1	Cash	$6,000
	Rent Revenue ($6,000 × 5 ÷ 6)		$5,000
	Deferred Rent Revenue ($6,000 × 1 ÷ 6)		$1,000
	To record rent revenue and unearned rent revenue
Dec. 20	Cash	$100
	Deposit on trailer		$100
	To record refundable deposit received
Dec. 31	Wages Expense	$9,500
	Wages Payable		$9,500
	To record wages payable

Requirement 2: Prepare the following adjusting entry

Date	Account Title and Explanation	Debit	Credit
Dec. 31	Interest Expense ($35,000 × 6% × 9 ÷ 12)	$1,575
	Interest Payable		$1,575
	To record accrued interest expense

Requirement 3: Prepare the following partial balance sheet

C Ltd
Balance Sheet (Partial)
December 31, 2019
Liabilities and Equity
Current Liabilities
Notes Payable - Short term	$35,000
Deposit on trailer	$100
Wages Payable	$9,500
Interest Payable	$1,575
Sales Tax Payable	$1,469
Deferred Rent Revenue	$1,000
Total Current Liabilities		$48,644

Requirement 4:

Transaction	Effect on Quick Ratio
Jan. 8	Quick ratio Increases
Jan. 19	Quick ratio Decreases
Mar. 10	Quick ratio Increases
Apr. 1	Quick ratio Increases
Jun. 3	Quick ratio Increases
Jul. 5	Quick ratio Decreases
Aug 1	Quick ratio Increases
Dec. 20	Quick ratio Decreases
Dec. 31	Quick ratio Decreases
Dec. 31	Quick ratio Decreases