Question

In: Accounting

Nabors Company reported the following current assets and liabilities for December 31 for two recent years:

	Dec. 31, Current Year	Dec. 31, Previous Year
Cash	$1,850	$2,490
Temporary investments	4,030	5,580
Accounts receivable	7,560	3,810
Inventory	3,020	2,970
Accounts payable	8,400	6,600

Required:

a. Compute the quick ratio on December 31 of both years. If required, round your answers to one decimal place.

	Quick Ratio
December 31, current year
December 31, previous year

b. Is the quick ratio improving or declining?

A business issued a 45-day, 4% note for $240,000 to a creditor on account.

Journalize the entries to record (a) the issuance of the note on January 1 and (b) the payment of the note at maturity, including interest. Assume a 360-day year. Refer to the Chart of Accounts for exact wording of account titles.

a. Journalize the entries to record the issuance of the note on January 1. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

Expert Solution

1)a. Quick Ratio = Quick Assets / Current Liabilities

Quick Assets = Cash + Temporary Investment + Accounts Receivable

Quick Assets of Current Year = $1850+$4030+$7560 = $13440

Quick Assets of Previous Year = $2490+$5580+$3810 = $11880

Current Liabilities of Current Year = $8400

Current Liabilities of Previous Year = $6600

Calculation of Quick Ratio :-

Current Year = Quick Assets / Current Liabilities

= $13440 / $8400

= 1.6 times

Previous Year = Quick Assets / Current Liabilities

= $11880 / $6600

= 1.8 times

1)b. Is the Quick Ratio Declining.

2) Journal Entries :-

Date	Description	Debit($)	Credit($)	Assets	Liabilities	Equity
Jan 1	Accounts Payable A/c	240000			-$240000
	Notes Payable A/c		240000		$240000
	(Being Record Issuance of Note on Account)

Feb 15	Notes Payable A/c	240000			-$240000
	Interest Expenses A/c ($2400004%(45/360))	1200				-$1200
	Cash A/c ($240000+$1200)		241200	-$241200
	(Being Record Payment of Note on Maturity)

ekkarill92 answered 2 years ago

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