Chapter 2:

Exercise These items are taken from the accounting records of Entity Z at its December 31, 2023 year end.

Accounts payable $3,450

Accounts receivable 7,320

Building 71,800

Accumulated depreciationbuilding 21,000

Depreciation expense 6,000

Cash 4,080

Common stock 40,000

Dividends 36,000

Sales revenue 99,650

Income tax expense 10,000

Income taxes payable 8,000

Insurance expense 3,784

Land (on which the building sits) 41,850

Note payable (due in 2028) 2,000

Patent 9,000

Prepaid insurance 1,188

Retained earnings, beginning 53,070

Salaries and wages expense 23,850

Salaries and wages payable 1,650

Supplies 228

Supplies expense 1,320

Tesla common stock (long-term investment) 11,000

Utility expense 1,400

Instructions In good form (include headings), prepare an income statement, a retained earnings statement, and a classified balance sheet as of December 31, 2023. Then compute the current ratio and the debt-to-total-assets ratios identifying which is a measure of liquidity and which is a measure of solvency. Don't forget this last part. Check figures: Retained earnings, December 31, 2023 $70,366; Total assets, $125,466 Income Statement Sales Revenue $99,650 Less: Expenses