Compute the net working capital and the current ratio

Assignment Help Accounting Basics

Reference no: EM131433865

The following information is given for a restaurant -

Purchases of food $55,000

Food Inventory Beg. Balance 10,000

Food Inventory Ending Balance 1,500

Purchase of glassware and silverware 250

Transfer from the bar to kitchen 300

Promotional meals 200

1. Compute the cost of goods sold for food.

a. $61,200

b. $63,600

c. $63,500

d. $55,250

2. Compute the gross profit or gross margin if the Revenues is $212,000

a. $235,650

b. $113,800

c. $148,400

d. $235,650

3. Compute the Net Income after tax if Operating Expenses are $31,500 and Income Tax is 6%

a. $87,591

b. $109,886

c. $115,829

d. $82,850

Compute the Net Working Capital and the Current Ratio given the following information

Current Assets Current Liabilities

Marketable Securities $2,000,000

Long Term Debt $4,500,000

Inventory $1,000,000

Accounts Payable $1,000,000

Current portion of Long-Term Debt $1,600,000

Prepaid expense $500,000

Cash $1,000,000

Building $2,500,000

Retained Earnings $2,000,000

Total CA Total CL

4. Compute the current ratio:

a. 1.26

b. 2.05

c. .755

d. 1.73

5. Compute the Net Working Capital: _________________________

a. $1,900,000

b. $7,900,000

c. -$1,300,000

d. $2,300,000

The Letch Plaza uses the following selected accounts (See chart below).

Account	Category / Classification	Normal Balance
Marketable Securities	Asset	#7
Retained Earnings	#6	Credit
Treasury Stock	Stockholder's Equity	#8
Wages Payable	#9	Credit
Cost of Goods Sold	Stockholder's Equity	#10
Common Stock	Stockholder's Equity	#12
Mortgage Payable	#11	Credit
Prepaid Insurance	#13	Debit
Equipment	Asset	#14
Accumulated Depreciation	#15	#16
Cash	Asset	#17
Allowance for Doubtful Accounts	#18	#19
Inventory	Asset	#20

6. Category Classification for Retained Earnings

a. Asset

b. Contra-Asset

c. Owner's Equity

7. Normal balance for Marketable Securities

a. Credit

b. Debit

8. Normal Balance for Treasury Stock

a. Credit

b. Debit

9. Category Classification for Wages Payable

a. Asset

b. Liability

c. Contra-Liability

10. Normal Balance for COGS

a. Credit

b. Debit

11. Category Classification for Mortgage Payable

a. Asset

b. Liability

c. Contra-Liability

12. Normal Balance for Common Stock

a. Credit

b. Debit

13. Category Classification for Prepaid Insurance

a. Asset

b. Liability

c. Owner's Equity

14. Normal Balance for Equipment

a. Credit

b. Debit

15. Category Classification for Accumulated Depreciation

a. Asset

b. Contra-Asset

c. Liability

16. Normal Balance for Accumulated Depreciation

a. Credit

b. Debit

17. Normal Balance for Cash

a. Credit

b. Debit

18. Category Classification for ADA

a. Asset

b. Contra-Asset

c. Contra-Equity

19. Normal Balance for ADA

a. Credit

b. Debit

20. Normal Balance for Inventory

a. Credit

b. Debit

21. A hotel company pays $40,000 for a two-year fire insurance coverage. If the journal entry is recorded as insurance expense $40,000. This violates the ___________ principal.

a. matching

b. cost

c. full disclosure

d. materiality

22. A hotel, in addition to reporting depreciation expense on its income statement, mentioned its method of depreciation and the estimated life of its assets in the footnotes. This is based on the ____________ principal.

a. business entity

b. consistency

c. cost

d. full disclosure

23. The F&B director purchases a case of excellent St.Emillion for $400. Because of the _________ principal the wine is recorded at the purchase price even though it could be resold for $500 immediately.

a. matching

b. cost

c. consistency

d. business entity

Rosalie opens a small cafe call Rosie's. The following are the transactions for the first week. Choose the correct journal entry.

24. Rosalie deposited $400,000 into Rosie's Cafe bank account

Capital	400,000
Cash		400,000

Cash	400,000
Capital		400,000

Investment	400,000
Capital		400,000

25. Purchased an old warehouse for $75,000 to convert into a restaurant.

Capital	75,000
Cash		75,000

Investment	75,000
Capital		75,000

Building	75,000
Cash		75,000

26. Purchased equipment on account for $120,000.

Equipment	120,000
Accounts Payable		120,000

Equipment	120,000
Cash		120,000

Investment	120,000
Capital		120,000

27. Rosalie catered a party for $2,000. She received $250 and the balance is on account.

Revenue	2,250
Cash		2,000
Accounts Receivable		250

Cash	250
Accounts Receivable	1,750
Revenue		2,000

Cash	2,250
Revenue		2,250

28. Rosalie paid employee wages of $200.

Wages Payable	200
Cash		200

Cash	200
Accounts Receivable	200
Wages Payable		400

Wage Expense	200
Cash		200

The following are transactions affecting a business. Compute the Cash Account balance.

Beginning cash $10,000

1. Bought a computer on account for $3,000

2. Sold rooms for $5,000 and collected cash

3. Paid for the computer in transaction #2

4. Sold a block of room on account for $10,000

5. Paid for advertising $500

6. Collected $8,000 in cash from a customer to pay account balance

7. Purchased Equipment $6,000 on Account

Cash Account
Transactions	Debit	Credit	Balance
Beg Cash
1.Computer
2. Rooms sold
3. Paid for computer
4. Sold rooms
5. Paid for advertising
6. Collected from customer
7. Purchased Equipment

29. Which transactions do not affect the cash account balance?

a. #2, 3 & 5

b. #3, 5 & 7

c. #1, 4 & 7

d. none of the above they all affect the cash account

30. What is the ending balance after all 8 transactions?

a. $7,300

b. $20,500

c. $19,500

d. $10,300

The following is information for Bella Dora Hotel for the year 2011.

During the year a net income of $100,000 was earned. The balance in the retained earning account at the beginning of the year was $700,000. The dividends declared were $30,000. Expenses in 2010 were understated by $3,000.

Retained Earnings 2011
Beginning Balance	$



Ending Balance

31. Compute the ending balance for retained earnings.

a. $767,000

b. $770,000

c. $1,000,000

d. $800,000

From the following facts complete depreciationfor the straight-line method

Cost of equipment $40,000

Salvage Value 3,000

Service life 5 years

Year	Cost of Equipment	Yearly Depreciation Expense	Accumulated Depreciation	Book Value
1
2
3
4
5

32. What is the Depreciation Expense for year 2?

a. $3,000

b. $8,000

c. $8,600

d. $7,400

33. What is the Accumulated Depreciation at the end of year 4?

a. $10,400

b. $29,600

c. $32,000

d. $40,000

34. What is the Book Value at the end of year 5?

a. $3,000

b. $40,000

c. $0

d. $37,000

From the following facts complete depreciation for the double declining method

Cost of equipment $30,000

Salvage Value 2,000

Service life 5 years Rate 40%

Year	Cost of Equipment	Book Value Beg-Year	Depreciation Expense	Accumulated Depreciation Year-end	Book Value Year-end
1
2
3
4
5

35. What is the cost of the equipment in year 2?

a. $25,600

b. $30,000

c. $28,000

d. $16,000

36. What is the Book Value Beginning year 3?

a. $40,000

b. $24,000

c. $10,800

d. $8,640

37. What is the Depreciation Expense for year 3?

a. $4,320

b. $3,456

c. $7,000

d. $16,000

A hotel property was purchased for $20,000,000. The cost included the building, the land and the furniture and equipment. After individual appraisals are done, the value of the land is estimated to be $8,000,000, the building at $12,000,000 and the furniture and equipment at $4,000,000. Apportion the lump cost to the land, building and furniture and equipment.

Asset	Appraised Value	% of Total	Apportionment of Cost
Land	8,000,000
Building	12,000,000
Furniture & Equipment	4,000,000
Total	24,000,000	100.00%	$20,000,000

38. What is the Apportionment of Cost for the Furniture and Equipment?

a. $3,333,333

b. $4,000,000

c. $7,777,777

d. $12,000,000

39. One of the limitations of the balance sheet is that it relies in part on estimates such as allowance for bad debt to accounts receivables.

a. True

b. False

40. If the cost of the oven was $10,000 and the accumulated depreciation at the end of its life with $8,000. Upon disposing of the asset it was sold for $3000, would this be a gain or loss

a. Gain of $3,000

b. Gain of $1,000

c. Loss of $2,000

d. Loss of $1,000

41. Accrual accounting recognizes revenues when they are collected and expenses when they are paid.

a. True

b. False

42. In selling assets, a loss results if cash received is less than the book value of the asset sold.

a. True

b. False

43. The Net Loss of an Income Statement is ________ to the Statement of Retained Earnings.

a. Subtracted

b. Added

44. The ability to convert current assets into cash for the purpose of paying short term liabilities is known as:

a. Liquidity

b. Solvency

45. Profits returned to the stockholders are known as __________.

a. Shares

b. Dividends

46. Debit is on the left and credit is on the right of the T account

a. True

b. False

47. A journal entry can affect only one account.

a. True

b. False

The ledger of Hammond Company, on March 31, 2016 includes these selected accounts before adjusting entries are prepared.

Debit Credit

Prepaid Insurance $ 3,600

Supplies 2,800

Equipment 25,000

Accumulated Depreciation-Equipment $5,000

Unearned Services Revenue 9,200

Prepare the adjusting entries for the month of March

48. Insurance expires at the rate of $100 per month

Prepaid Insurance	100
Cash		100

Insurance Expense	100
Cash		100

Insurance Expense	100
Prepaid Insurance		100

49. Supplies on hand total $800 at end of month (ending inventory)

Supplies Expense	2,000
Supplies		2,000

Supplies Expense	800
Supplies		800

Prepaid Supplies	800
Supplies		800

50. The equipment depreciates $200 a month

Depreciation Expense	200
Cash		200

Depreciation Expense	200
Equipment		200

Depreciation Expense	200
Accumulated Depreciation		200

Looking forward to the team de-briefing on March 21.

Reference no: EM131433865

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len1433865

3/20/2017 5:49:51 AM

I also need to have explanation about the homework. One of the limitations of the balance sheet is that it relies in part on estimates such as allowance for bad debt to accounts receivables. Accrual accounting recognizes revenues when they are collected and expenses when they are paid.

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