Chapter 15 Pro-Built Assignment 5. 10.00 points Carfsville Company, which began
ID: 2582337 • Letter: C
Question
Chapter 15 Pro-Built Assignment 5. 10.00 points Carfsville Company, which began operations in 2015, invests its idle cash in trading securities. The following transactions are from its short-term investments in trading securities 2015 Jan. 20 Purchased 900 shares of Ford Motor Co. at $28 per share plus a $125 commission Fob. 9 Purchased 2,700 shares of Lucent at $32 per share plus a $195 commission Oct. 12 Purchased 760 shares of Z-Seven at $7.10 per share plus a $100 commission. Dec. 31 Fair value of the short-ten investments in trading secunties is $122.600 2016 Apr. 15 Sold 900 shares of Ford Motor Co. at $31 per share less a $295 commission July 5 Sold 760 shares of 2-Seven at $11.00 per share less a $100 commission July 22 Purchased 1,900 shares of Hunt Corp at $33 per share plus a $230 commission Aug. 19 Purchased 1,800 shares of Donna Karan at $42.20 per share plus a $105 commission Dec. 31 Fair value of the short-term investments in trading securities is $220,250. 2017 Feb. 27 Purchased 3,800 shares of HCA at $38 per share plus a $420 commission. Mar. 3 Sold 1,900 shares of Hunt at $28 per share less a $125 commission. June 21 Sold 2,700 shares of Lucent at $29.75 per share less a $37 commission. June 30 Purchased 1,500 shares of Black & Decker at $47.50 per share plus a $600 commission Nov. 1 Sold 1,800 shares of Donna Karan at $42.20 per share less a $124 commission. Dec. 31 Fair value of the short-term investments in trading securities is $224,300. Required: Prepare joumal entries to record these short-term investment activities for the years shown. On December 31 of each year, prepare the adjusting entry to record any necessary fair value adjustment for the portfolio of trading securities. (If no entry is required solect No journal entry required in the first entry field. Do not round your intermediate calculations.) Viow transaction listExplanation / Answer
Solution:
1) Current Ratio
- Current Ratio shows the ability to repay short-term debts promptly.
- It is one of the best measures of Financial strength
- High Ratio indicates existence of idle Current Assets
Current Assets = Inventories + Sundry Debtors + Cash and Bank Balances + Receivables/ Accruals + Loans and Advances + Disposable Investments
Current Liabilities = Creditors for goods and services + Short-term Loans + Bank Overdraft + Cash Credit + Outstanding Expenses + Provision for Taxation + Proposed Dividend + Unclaimed Dividend
Mathematically, Current Ratio is calculated as follows:
Current Ratio = Current Assets / Current Liabilities
Current Ratio
Choose Numerator
/
Choose Denominator
=
Current Ratio
Current Assets
/
Current Liabilities
=
Current Ratio
2015
252862
/
134673
=
1.88
to 1
2014
201478
/
79585
=
2.53
to 1
2013
147605
/
5128
=
28.78
to 1
2) Acid Test Ratio
It shows the ability to meet immediate test ratio liabilities.
It includes cash and near cash assets
- Inventories & Prepaid expenses are deducted from Current Assets on the belief that there are not near cash assets.
Quick Assets = Current Assets –Inventories – Prepaid Expenses
Quick Liabilities = Current Liabilities – Bank Overdraft Cash Credit
Acid Test Ratio
Choose Numerator
Choose Denominator
=
Acid Test Ratio
Cash
+
Accounts Receivable, net
+
/
Current Liabilities
=
Acid Test Ratio
2015
31591
+
92484
+
0
/
134673
=
0.92
to 1
2014
36927
+
66581
+
0
/
79585
=
1.30
to 1
2013
38085
+
51796
+
0
/
5128
=
17.53
to 1
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Pls ask separate question for remaining parts.
Current Ratio
Choose Numerator
/
Choose Denominator
=
Current Ratio
Current Assets
/
Current Liabilities
=
Current Ratio
2015
252862
/
134673
=
1.88
to 1
2014
201478
/
79585
=
2.53
to 1
2013
147605
/
5128
=
28.78
to 1
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