The December 31, 2014 balance sheet for Morrison Home Services is summarized below. During January of 2015,
Question:
The December 31, 2014 balance sheet for Morrison Home Services is summarized below.
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During January of 2015, the following transactions were entered into:
1. Services were performed for $7,000 cash.
2. $3,000 cash was received from customers on outstanding accounts receivable.
3. $3,000 cash was paid for outstanding liabilities.
4. Long-term assets were purchased in exchange for a $6,000 note payable.
5. Expenses of $4,000 were paid in cash.
6. A dividend of $800 was issued to the owners.
REQUIRED:
a. Provide a journal entry for each transaction.
b. Treat each transaction independently and describe how each would affect the ratios of current assets divided by current liabilities, net income divided by shareholders’ equity, and total liabilities divided by shareholders’ equity; and Morrison’s current ratio, return on equity, and debt/equity ratio, respectively.
c. Prepare the income statement, statement of shareholders’ equity, the January 31 balance sheet, and the statement of cash flows (direct method) for January.
d. (Appendix 4A) Prepare the operating section of the statement of cash flows under the indirectmethod.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
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Step by Step Answer:
a 1 Cash A 7000 Fees Earned R SE 7000 Rendered services 2 Cash A 3000 Accounts Receivable A 3000 Collected cash from customers on account 3 Liabilitie...View the full answer
