In: Accounting
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