Question 1

Calculate the current ratio using the following information: (Round your answer to two decimal places.) $$\begin{array} { l l } 
\text { Cash } & \$ 5,000 \
\text { Accounts Receivable } & 1,100 \
\text { Prepaid Rent } & 1,000 \
\text { Land } & 40,000 \
\text { Equipment } & 4,000 \
\text { Accumulated Depreciation } & 1,200 \
\text { Accounts Payable } & 3,000 \
\text { Salaries Payable } & 900 \
\text { Notes Payable-long term } & 9,000
\end{array}$$
A) 1.82
B) 2.37
C) 3.09
D) 1.56

Accepted Answer

The current ratio is calculated as Current Assets / Current Liabilities. Here, Current Assets = Cash + Accounts Receivable + Prepaid Rent = $5,000 + $1,100 + $1,000 = $7,100. Current Liabilities = Accounts Payable + Salaries Payable = $3,000 + $900 = $3,900. Therefore, Current Ratio = $7,100 / $3,900 = 1.82 (rounded to two decimal places).

Question 2

Reversing entries are special journal entries that ease the burden of accounting for transactions in a later period.

Accepted Answer

Reversing entries are made at the beginning of a new accounting period to cancel out certain adjusting entries made in the previous period, simplifying the accounting process for the new period.

Question 3

The following contains information from the records of the Becker Architecture Firm. $\begin{array}{c}
\text { Becker Architecture Firm}\
\text { Selected Financial Information}\
 \text { December 31,2019}\
\begin{array}{|l|r|}
\hline \text { Current Assets } & \$ 90,000 \
\hline \text { Current Liabilities } & 30,000 \
\hline \text { Long-Term Assets } & 99,000 \
\hline \text { Long-Term Liabilities } & 60,000 \
\hline \text { Total Revenues } & 55,000 \
\hline \text { Total Expenses } & 37,000\
\hline
\end{array}\end{array}$
 Which of the following statements is an accurate interpretation of the current ratio of the Becker Architecture Firm? (Round your answer to two decimal places.)
A) The company has $2.53 of current assets for every $1.00 of liabilities.
B) The company has $3.00 of current assets for every $1.00 of current liabilities.
C) The company has $1.65 of current assets for every $1.00 of liabilities.
D) The company has $0.62 of current assets for every $1.00 of current liabilities.

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities, which is $90,000 / $30,000 = 3. This means the company has $3.00 of current assets for every $1.00 of current liabilities.

Question 4

The current ratio measures a company's ________.
A) overall ability to pay liabilities
B) ability to pay current liabilities from current assets
C) proportion of assets that are financed by debt
D) rate of cash flow

Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to pay its current liabilities with its current assets. It provides an indication of a company's short-term financial health and its ability to meet its obligations as they come due.

Question 5

Which of the following would be considered the weakest current ratio?
A) 0.55
B) 0.90
C) 1.25
D) 2.30

Accepted Answer

A current ratio represents a company's ability to pay its short-term obligations. The higher the ratio, the better the company's ability to pay. Therefore, the weakest current ratio would be the smallest one, which in this case is option A with a ratio of 0.55.

Question 6

A company has $110,000 in current assets; $600,000 in total assets; $80,000 in current liabilities, and $140,000 in total liabilities. Calculate the current ratio of the company. (Round your answer to two decimal places.)
A) 1.38
B) 1.82
C) 1.73
D) 0.79

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. For this company, the current ratio = $110,000 / $80,000 = 1.375, which rounds to 1.38.

Question 7

Perry Service Company had the following unadjusted balances at December 31, 2018: Salaries Payable, $0; Salaries Expense, $12,000. The following transactions took place on December 31, 2018:
Accrued Salaries Expense, $5,000
Closed the Salaries Expense account.
The following transaction took place on January 4, 2019:
Paid salaries of $6,000. This payment included $5,000 that was accrued on December 31, 2018 and $1,000 for the first few days in January 2019.
Prepare the journal entry for January 4, 2019, assuming that reversing entries were not made. Omit explanation.

Accepted Answer

The answer of Perry Service Company had the following unadjusted...

Question 8

Pioneer's adjusted trial balance as of December 31, 2018 is given below:  Compute the current ratio. (Round your answer to two decimal places.)
A) 8.16
B) 2.36
C) 1.75
D) 2.78

Accepted Answer

11ea8553_2c4d_88d0_a343_d7c9566fe1d0_TB5019_00 Current ratio = Total current assets / Total current liabilities
Current ratio = $33,400 / $12,000 = 2.78

Question 9

The following information is provided for Journey Inc. and Mastery Inc. Both corporations provide training materials for electricians.
Current Ratio
 $$\begin{array} { | l | c | c | } 
\hline \text { Company } & \mathbf { 2 0 1 8 } & \mathbf { 2 0 1 9 } \
\hline \text { Journey Inc. } & 1.8 & 1.2 \
\hline \text { Mastery Inc. } & .8 & 1.4 \
\hline
\end{array}$$ a. Which company has the stronger current ratio for 2018 and 2019? Defend your answer.
b. Discuss the change in current ratio for each company.

Accepted Answer

The answer of The following information is provided for Journey...

Question 10

The current ratio measures ________.
A) a company's ability to sell its long-term assets
B) a company's ability to pay current liabilities from its total assets
C) a company's ability to pay current liabilities from current assets
D) a company's profitability during a particular period

Accepted Answer

The current ratio measures a company's ability to pay its current liabilities (those due within one year) from its current assets (those that can be converted into cash within one year). It is a measure of liquidity, not profitability or the ability to sell long-term assets.

Question 11

Which of the following statements is an accurate interpretation of the current ratio?
A) A current ratio of 1.5 or higher is considered a high-risk ratio.
B) A current ratio below 1.00 is considered a good and safe ratio.
C) A current ratio of 2.0 indicates a strong ability to pay current liabilities.
D) A current ratio of 0.60 or lower is a good and safe ratio.

Accepted Answer

A current ratio of 2.0 indicates a company has twice as many current assets as current liabilities, which suggests a strong ability to pay off short-term debts. A ratio of 1.5 or higher is generally considered a safe ratio, not a high-risk ratio. A current ratio below 1.00 indicates that a company may have difficulty paying off its current liabilities with its current assets. A current ratio of 0.60 or lower is low and suggests the company may have difficulty meeting its current obligations.

Question 12

Wilson Engraving just completed operations for the year ending December 31, 2018. Accounts from the adjusted trial balance dated December 31, 2018 are listed in alphabetical order below:
  Requirement:
a. Prepare the closing entries. Omit explanations.
b. Prepare, in good form, the income statement, statement of retained earnings, and balance sheet.
c. Compute the current ratio. Label your work. Comment on the current ratio.

Accepted Answer

The answer of Wilson Engraving just completed operations for the...

Question 13

A reversing entry is ________.
A) a journal entry used to close the temporary accounts after preparation of financial statements
B) a special journal entry used to make the adjustments that took place after preparing the trial balance
C) a special journal entry that eases the burden of accounting for transactions in the next period
D) a journal entry prepared at the end of an accounting period to match assets with liabilities

Accepted Answer

A reversing entry is a special type of journal entry that is made at the beginning of an accounting period to reverse certain adjusting entries from the previous period. This eases the burden of accounting for transactions in the next period by eliminating the need for certain adjusting entries to be recorded again. Reversing entries are typically used for accruals and deferrals.

Question 14

Reversing entries are used in conjunction with ________.
A) accrual-type adjustments
B) deferred revenues
C) deferred expenses
D) Unearned Revenue and Prepaid Rent

Accepted Answer

Reversing entries are used in conjunction with accrual-type adjustments, which are made to record revenues or expenses in the period they were earned or incurred, rather than when cash is exchanged. Reversing entries are made to cancel out the original accrual entry and ensure that the correct balances are carried forward into the next accounting period. They simplify the process of recording subsequent transactions and avoid the risk of double-counting. Reversing entries are not typically used with deferred revenues or expenses, unearned revenue, or prepaid rent.

Question 15

Brownstone, Inc. has a current ratio of 6.00. This indicates that the company has $6 in ________.
A) current liabilities for every $1 of current assets
B) total assets for every $1 of current liabilities
C) current assets for every $1 of current liabilities
D) total assets for every $1 of current assets

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Therefore, a current ratio of 6.00 indicates that Brownstone, Inc. has $6 in current assets for every $1 of current liabilities.

Question 16

The following contains information from the records of Bourne Engineers and Architects. $\begin{array}{c}\text {Boume Engineers and Architects}\
\text {Selected Financial Information}\
\text {December 31,2019}\
\begin{array}{|l|r|}
\hline\text { Current Assets } & \$ 80,000 \
\hline \text { Current Liabilities } & 42,000 \
\hline \text { Long-Term Assets } & 98,000 \
\hline \text { Long-Term Liabilities } & 65,000 \
\hline \text { Total Revenues } & 55,000 \
\hline \text { Total Expenses } & 32,000\
\hline
\end{array}\end{array}$ Calculate the current ratio. (Round your answer to two decimal places.)
A) 1.51
B) 2.25
C) 0.59
D) 1.90

Accepted Answer

The answer of The following contains information from the records...

Question 17

The formula for computing the current ratio is ________.
A) Current ratio = Total Current assets / Total assets
B) Current ratio = Total Current assets / Total liabilities
C) Current ratio = Total Current assets / Total Stockholders' Equity
D) Current ratio = Total Current assets / Total Current liabilities

Accepted Answer

The formula for computing the current ratio is Total Current assets divided by Total Current liabilities. Option D is the only choice that presents this formula.

Question 18

Generally Accepted Accounting Principles (GAAP) require every organization to prepare reversing entries.

Accepted Answer

Reversing entries are an optional accounting procedure and not a requirement under Generally Accepted Accounting Principles (GAAP). They are used at the discretion of the organization to simplify the recording of transactions in the new accounting period.

Question 19

Answer the following questions regarding the current ratio:
 $\begin{array}{|l|l|}
\hline \text { Current Ratio Question } & \text { Answer } \
\hline \text { What does the current ratio } & \
\text { measure? } & \
\hline \text { How is the current ratio } \
\text { calculated? }\
\hline \text { When analyzing the current }\
 \text {ratio, what is the rule of }\
 \text {tlaunb?}\
\hline
\end{array}$

Accepted Answer

The answer of Answer the following questions regarding the current...

Question 20

An increase in the current ratio implies that the profitability of the company has increased from the previous period.

Accepted Answer

The current ratio measures the short-term liquidity of a company by comparing its current assets to its current liabilities. An increase in the current ratio indicates that the company has improved its ability to pay off its short-term debt obligations. It does not necessarily indicate an increase in profitability. A company may increase its current ratio by increasing its current assets or decreasing its current liabilities, without necessarily increasing profitability.

Quiz 4: Completing the Accounting Cycle

Reversing entries are special journal entries that ease the burden of accounting for transactions in a later period.

The current ratio measures a company's ________.

Which of the following would be considered the weakest current ratio?

A company has $110,000 in current assets; $600,000 in total assets; $80,000 in current liabilities, and $140,000 in total liabilities. Calculate the current ratio of the company. (Round your answer to two decimal places.)

Pioneer's adjusted trial balance as of December 31, 2018 is given below: Compute the current ratio. (Round your answer to two decimal places.)

The current ratio measures ________.

Which of the following statements is an accurate interpretation of the current ratio?

A reversing entry is ________.

Reversing entries are used in conjunction with ________.

Brownstone, Inc. has a current ratio of 6.00. This indicates that the company has $6 in ________.

The formula for computing the current ratio is ________.

Generally Accepted Accounting Principles (GAAP) require every organization to prepare reversing entries.

An increase in the current ratio implies that the profitability of the company has increased from the previous period.