Question

HORNGREN'S ACCOUNTING - 12th Edition P4-36B Requirements 1. Prepare the company's income statement for the year ended December 31, 2018. 2. Prepare the company's statement of owner's equity for the year ended December 31, 2018. Assume that there were no contributions made by the owner during the year. 3. Prepare the company's classified balance sheet in report form at December 31, 2018 4. Journalize the closing entries for Bradley Irrigation System 5. Compute the company's current ratio at December 31, 2018. Al December 31, 2017, the current ratio was 1.7. Did the company's ability to pay debts improve or deteriorate, or did it remain the same? Solution: Requirement 1 BRADLEY IRRIGATION SYSTEM Income Statement Year Ended December 31, 2018 BRADLEY IRRIGATION SYSTEM Statement of Owner's Equity Year Ended December 31, 2018 Page 75 of 131 Chapter 4: Completing the Accounting Cycle fainn height.7290 Trang |

Answer 1

Amount $56,000 Ans 1 Bradley Irrigation System Income Statement Year Ended December 31, 2018 Particulars Amount Service Revenue Less: Expenses Salaries Expense $16,200 Insurance Expense $1,200 Supplies Expense $1,400 Depreciation Expense - Building $1,200 Depreciation Expense - Equipment $2,600 Interest Expense $2,000 Total Expense Net Income $24,600 $31,400 Ans 2 Bradley Irrigation System Statement of Retained Earnings Year Ended December 31, 2018 Particulars Beginning Capital Add: Net income for the year Less: Withdrawals Ending Capital Amount $45,000 $31,400 ($3,200) $73,200

Amount Amount $12,000 $51,000 $28,300 $4,700 $96,000 $32,000 $14,200 Ans 3 Bradley Irrigation System Balance Sheet December 31, 2018 Assets Amount Cash Accounts Receivable Office Supplies Prepaid Insurance Total Current Assets Property, Plant & Equipment Building $57,300 Less: Accumulated Depreciation - Building ($25,300) Equipment $21,000 Less: Accumulated Depreciation - Equipment ($6,800) Net Property, Plant & Equipment Total Assets Liabilities Current Liabilities Accounts Payable $40,700 Interest Payable $2,000 Salaries Payable $3,500 Unearned Revenue $1,800 Total Current Liabilities Non Current Liabilities Notes Payable Total Liabilities Owners' Equity Bradley Capital Total Liabilities and Owner's Equity $46,200 $1,42,200 $48,000 $21,000 $69,000 $73,200 $1,42,200

Credit Debit $56,000 $56,000 $24,600 Ans 4 Closing Entries Date Particulars 31-Dec-18 Service Revenue Income Summary (To close the revenue account) 31-Dec-18 Income Summary Salaries Expense Insurance Expense Supplies Expense Depreciation Expense - Building Depreciation Expense - Equipment Interest Expense (To close all expense accounts) 31-Dec-18 Bradley Capital Income Summary (To close the Income Summary Account) 31-Dec-18 Bradley Withdrawal Bradley Capital (To close the withdrawal account) $16,200 $1,200 $1,400 $1,200 $2,600 $2,000 $24,600 $24,600 $3,200 $3,200 Ans 5 Current Ratio = Current Assets/Current Liabilities Current Ratio = $96000/$48000 Current Ratio = 2.00 The company's ability to pay debts improves as compared to Dec 2017