13. A company borrows 530,000 from a bank on September 1, 2017. The six-month lo

Question

13. A company borrows 530,000 from a bank on September 1, 2017. The six-month loan has an effective rate of 3% (annually). Assume that al interest and principal are paid at mafurity. How much interest expense will the company recognine over the sntirs loan term of six months? a $2,400 b. $1,600 e. $1,200 d. $800 14. The employees of Nixon Co. have worked the last two weeks of 2017, but the employees wages have not been paid nor recorded as of December 31, 2017. The adjusting entry that Nixon Co. should make for these unpaid wages on December 31, 2017 is: a. Debit to wage expense and credit to cash b. Debit to wage expense and credit to wages payable. c. Debit to wages payable and credit to wages expense. d. No entry is required until the employee is paid next period 1S. The following are account balances at the end of the year (post-adjusting entries) $181.500 232,550 150,000 192,950 72,500 192,500 31,000 980,700 698,500 117.500 145,000 15,000 80,000 Cash Building Acumulated depreciation Inventory Retained Salaries payable Sales Cost of goods sold Accounts payable Accounts receivable Uncarned revenue (current) Interest payable What is the current ratio as of year-end (round to the nearest cent)? a. 1.76 b. 2.13 c. 2.44 d. 3.92 Page 5 of 15

Explanation / Answer

13.c.$1,200

Interest expense = $80,000*(3/100*6/12)

= $1,200

14.b. Debit to wage expense and credit to wages payable

Since the wages are not paid cash shounld not be credited and as per accruel system of accounting an wage expense shall be recorded and the wages payable shall be credited as it is payable as at the end of the year as an adjustment.

15.b. 2.13

Current ratio = Total current assets/ Total current liabilities

= (Inventory + Accounts receivable + Cash)/(Salaries payable + Accounts payable + Unearned revenue + Interest payable)

= ($192,950 + $145,000 + $181,500)/($31,000 + $117,500 + $15,000 +$80,000)

= $519,450/$243,500

= 2.13

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