Lily May Electronics recognizes expenses for wages, interest, and rent when cash payments are made. The following
Question:
Lily May Electronics recognizes expenses for wages, interest, and rent when cash payments are made. The following related cash payments were made during December 2017:
1. December 1 Paid $1,100 for rent to cover the subsequent 12 months.
2. December 5 and 20 Paid wages in the amount of $7,500. Wages in the amount of $7,500 are paid on the fifth and the twentieth of each month for the 15 days just ended. The next payment will be on January 5, 2018.
3. December 15 Paid $600 interest on an outstanding note payable. The note has face value of $10,000 and a 12 percent annual interest rate. Interest payments in the amount of $600 are made every six months.
As of December 31, the current assets and current liabilities reported on Lily May’s balance sheet were $24,000 and $15,000, respectively. Lily May’s income statement reported net income of $7,500.
Compute Lily May’s current ratio and net income if the company were to account for wages, interest, and rent on an accrual basis.
Balance SheetBalance 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... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
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Current Assets Current Liabilities Net Income Reported amounts 24000 1...View the full answer
