Question

The calendar year-end adjusted trial balance for Acosta Co. follows: 1. ACOSTA co Adjusted Trial Balance December 31 Cash $ 100,000 7,000 15,000 Accounts receivable Prepaid rent Prepaid Insurance... Office supplies. Office equipment Accumulated depreciation-Equipment . Building... Accumulated depreciation-Building. 9,000 3,300 8,000 $ 3,200 350,000 700,000 42,000 5,800 14,500 2,500 52,000 1,010,000 Accounts payable .. Salaries payabl.e. Interest payable Long-term note payable. Margarita Acosta, Capital. Margarita Acosta, Withdrawas.s. Service fees earned.. 200,500 370,800 90,000 5,200 5,000 800 Salaries expense Insurance expens Rent expense. Depreciation expense-Equipment.... Depreciation expense-Building. Totals. 7,000 Required (a) Prepare its income statement, statement of owner's equity (Assume the owner did not make any investments in the business this year.) (b) Prepare a classified year-end balance sheet. (Note: A $7,000 installment on the long-term note payable is due within one year) (c) Calculate the current ratio. Comment on the ability of Acosta Co. to meets its short-term debts. 、Short Answer Questions 40 marks 1. What are the financial statement analysis objectives? 2. The following are the steps in the accounting cycle. List them in the order in which they are completed: Prepare adjusted trial balance Post transactions Prepare an unadjusted 1 Journalize trapsacti Prepare the financial state Close the temporary accounts Adjust the ledger accounts Prepare a post-closing trial balance Analyze transactions al On January 1, a company borrobood sto,000 cash by signing a 9% installment note that is to be repaid with 4 annual year-end the total payments on this note knouptho $86,428. Explain. 3. of $2ł,607. While the amount borrowed equals $70,000, Define the return on total assets and explain how it is used to measure a company's financia performance 4.

Answer 1

Acosta Co Income Statement Srvice Fees earned 370,800 Less Expenses Salaries expense 90,000 Insurance expense 5,200 5,000 Rent expense Depreciation expense -Equipment 800 10 Depreciation expense -Building 7,000 Total epenses 108,000 12 Net Income 262,800 13 14 Acosta Co Statement of Owner's Equit 15 16 Margarita Acosta ,Beginning Capital 1,010,000 Add Net Income 17 262,800 Less Margarita Acosta,Withdrawls (200,500) 62,300 18 Margarita Acosta, Ending Capital 19 1,072,300 20

21 b) Acosta Co Balance Sheet 23 Assets Cash 100,000 Accounts Receivable 7,000 25 Prepaid Rent 26 15,000 Prepaid Insurane 9,000 Office Supplies 3,300 Total Current Assets 29 134,300 Property ,Plant & Equipment 30 Land 1 700,000 Office Equipment 32 8,000 Accumulated Depreciation - Equipment 3,200 4,800 Building 34 350,000 (42,000) Accumulated Depreciation - Building 308,000 1,012,800 Total Assets 1,147,100 7

Liabilities & Owner's Equity 38 39 Accounts Payable 5,800 Salaries Payable 40 14,500 41 Interest Payable 2,500 42 Current Portion of Long term Notes Payable 7,000 43 Total Current Liabilities 29,800 Long Term Liabilities Long term Notes Payable (52000-7000) 45 45,000 Total Liabilities 46 74,800 47 Owner's Equity Margarita Acosta, Capital 18 1,072,300 49 Total Liabilities & Owner's Equity 1,147,100 50 51 C) Current Ratio- Current Assets Current Liabilities 52 53 134300 54 29800 56 4.51 57 58 59 Company's Financial Position is very strong and it can easily met its short term debts.