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In: Accounting

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.

(c) Prepare reversing entries, assuming prepaid expenses are originally record as expenses.

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 2 years ago
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