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3 years ago

Byrd Company had the following transactions during 2016 and 2017:

Business

1 answer:

-BARSIC- [3]3 years ago

3 0

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

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