White Ltd has adjusted trial balance as follows on 30 June 2020. Debit Credit Cash 1,280,000...

White Ltd has adjusted trial balance as follows on 30 June 2020.

	Debit	Credit
Cash	1,280,000
Service fee revenue		81,000
Account receivable	650,000
Prepaid insurance expense	55,000
Equipment	980,000
Accumulated depreciation-Equipment		305,000
Salaries expense	753,000
Depreciation expense	21,000
Accounts payable		281,000
Loan		730,000
Capital		400,000
Drawings	15,000
Retained earnings		310,000
Rent expense	23,000
Sales		7,021,000
Rent revenue		6,000
Cost of goods sold	4,100,000
Prepaid rent expense	71,000
Inventory	430,000
Accrued service fee revenue	11,000
Insurance expense	25,000
Interest expense	50,000
Commission expense	670,000
	9,134,000	9,134,000

Required:

(a) Prepare the closing entries.

(b) Calculate debt-to-equity ratio and interest coverage ratio, and comment on the solvency of the company.

Debt-to-equity ratio = Total liabilities/Total shareholders’ equity

Interest coverage ratio = Earnings before interest and tax (EBIT)/Net interest expense

*Please upload the solution as soon as you can finish it. Thanks for your help

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Expert Solution

ekkarill92 answered 1 year ago

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