Computek Ltd. completed the following transactions during 2015. The company’s fiscal year ends on December 31, 2015.
Jan. 8 Purchased on account merchandise for resale at a cost of $ 14,500, with terms 2/ 10, n/ 30. The company uses a periodic inventory system.
19 Paid the invoice received on January 8.
Mar. 10 Sold merchandise on credit for a total amount of $ 11,300, which included GST at 5 percent and PST at 8 percent of the sales amount.
Apr. 1 Borrowed $ 35,000 from the bank for general use; signed a 12- month, 6 percent interest-bearing note.
June 3 Purchased merchandise for resale at a cost of $ 16,420.
July 5 Paid the invoice received on June 3.
Aug. 1 Rented a small office in a building owned by the company and collected $ 6,000 for six months’ rent in advance. Ignore sales taxes. (Record the collection in a way that will not require an adjusting entry at year- end.)
Dec. 20 Received a $ 100 refundable deposit from a customer as a guarantee to return a large trailer “borrowed” for 30 days.
31 Determined that wages earned but not yet paid on December 31 amounted to $ 9,500. Ignore payroll taxes.
Required:
1. Prepare the journal entry for each of these transactions.
2. Prepare the adjusting entry (entries) required on December 31, 2015.
3. Show how all of the liabilities arising from these transactions are reported on the statement of financial position at December 31, 2015.
4. For each transaction and related adjusting entry, state whether the quick ratio increases, decreases, or remains the same. Assume that the quick ratio is less than 1.0 before considering each transaction.