Answer:
A. Dec. 24, 2016
Dr Equipment-Computer58800
Cr Accounts payable 58800
Dec. 29, 2016
Dr Cash 60000
Cr Notes payable 60000
Dec. 30, 2016
Dr Retained earnings 20000
Cr Dividends payable 20000
Dec. 31, 2016
Dr Interest expense 40
Cr Interest payable 40
Jan. 2, 2017
Dr Accounts payable 58800
Cr Cash 58800
Jan. 5, 2017
Dr Dividends payable 20000
Cr Cash 20000
Jan. 28, 2017
Dr Interest payable 40
Dr Interest expense560
Dr Notes payable 60000
Cr Cash 60600
B.$ 138840
C. 2016 1.9
Explanation:
a. Preparation of the journal entries for Byrd for both 2016 and 2017.
Dec. 24, 2016
Dr Equipment-Computer58800
[$60000 x (1-0.02)]
Cr Accounts payable 58800
(To record purchase of computer on account)
Dec. 29, 2016
Dr Cash 60000
Cr Notes payable 60000
(To record issuance of note payable)
Dec. 30, 2016
Dr Retained earnings ($2.00 x 10000) 20000
Cr Dividends payable 20000
(To record dividends declared)
Dec. 31, 2016
Dr Interest expense 40
($60000 x 12% x 2/360)
Cr Interest payable 40
(To record interest accrued on the note)
Jan. 2, 2017
Dr Accounts payable 58800
Cr Cash 58800
(To record payment on account)
Jan. 5, 2017
Dr Dividends payable 20000
Cr Cash 20000
(To record payment of dividends)
Jan. 28, 2017
Dr Interest payable 40
Dr Interest expense560
($60000 x 12% x 28/360)
Dr Notes payable 60000
Cr Cash 60600
(To record payment on note and interest thereon on maturity)
B. Calculation to Show how the preceding items would be reported in the current liabilities section of Byrd's December 31, 2016, balance sheet.
BYRD COMPANY
Balance Sheet (Partial)
December 31, 2016
Current liabilities
Accounts payable 58800
Notes payable 60000
Interest payable 40
Dividends payable 20000
Total current liabilities $ 138840
C. computation for the current ratio at the end of 2016
Using this formula
Current ratio = Current assets/Current liabilities
End of 2015: 2.4 = $1200000/Current liabilities
Current liabilities = $1200000/2.4 = $500000
End of 2016: Current assets = $1200000 + $60000 = $1260000
Current liabilities = $500000 + $58800 + $60000 + $20000 + $40 = $638840
Now let calculate the Current ratio
Current ratio = $1260000/$638840
Current ratio= 1.9
Therefore Byrd's current ratio at the end of 2016 is 1.9
