Question 1.

(a) Using the information provided , calculate 4 ratios that would be relevant in determining whether or not Carrison Furniture Inc. can pay both its current and long - term debt . Comment on whether the company's position has improved during 2020 .

2020 2019 Cash $ 30,000 $ 51,000 Short - term investments 35,000 Net receivables 118,000 128,000 Inventory 242,000 272,000 Prepaid expenses 18,000 11,000 Total assets 530,000 490,000 Total current liabilities 177,000 262,000 Long - term debt 38,000 56,000 Income from operations 195,000 162,000 Interest expense 41,000 45,000

Required : 1. Compute the current ratio , quick ratio , debt ratio and times interest earned for 2020 and 2019. ( Round the ratios to two decimal places . ) 2. Comment on whether the company's position has improved during 2020 .

(b) On July 1 , 2019 , Caterpillar Inc. bought the equipment at $ 80,000 . At the time of the purchase , the residual value was estimated at $ 5,000 and the useful life was estimated to be 5 years . On Mar 31 , 2021 the company sold the equipment and received $ 30,000 cash . The company has a December 31 year - end . Required ( Show your calculations ) : 1. Assume that the company uses the double - diminishing - balance method for the depreciation of this equipment , how much is the depreciation expense for the year 2020 ? 2. Assume that the uses the straight - line depreciation method for this equipment , ( 1 ) how much is the gain or loss from the disposal of this equipment on Mar 31 , 2021 ? ( 2 ) Prepare the journal entry to record the depreciation expense for 2021 and record the sale of equipment on Mar 31 , 2021 . 3. Assume that the company uses the straight - line depreciation method for this equipment . Also assume that on Jan 1 of 2020 , the company changed the estimation of the useful life and then realized that the only 2 years are left in terms of the useful life from Jan. 1 of 2020. The residual value estimation did not change at that time . How much is the depreciation expense for the year 2020 ?

(c) On October 1 , 2020 Google Corporation issues $ 4,000,000 of 10 % 10 - year bonds dated October 1 , 2020 , at 114 when the market rate of interest was 8 % . Google Inc. uses the effective - interest method of amortization . Interest is paid each October 1 and April 1 . Round answers to the nearest dollar . Required : 1. Prepare an effective interest method amortization table for the first four semi annual interest periods . 2. Record issuance of the bonds on October 1 , 2020 , the interest and amortization on December 31 , 2020 , on April 1 , 2021 and on October . 3. Show how Google Inc. would report the bonds on its balance sheet at December 31 , 2020 . 1, 2021.