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Group 5 - Major Assignment 1
Magic GMBA 5 Corporation
Adjusted Trial Balance December 31, 2019 $ Dr $ Cr Cash 1,877,632 Accounts receivable 1,120,000 Allowance for bad debts 17,600 Inventory 1,440,000 Long term investment 348,800 Property, plant, and equipment 1,600,000 Accumulated depreciation 640,000 Accounts payable 262,400 Accrued payables 192,000 Unearned revenues 256,000 Other long term liability 170,848 Bonds payable 1,600,000 Discount on bonds payable 170,720 Deferred income tax 102,272 Preferred stock 1,600,000 Common stock 160,000 Additional paid-in capital 1,760,000 Retained earnings 960,000 Dividends 128,000 Treasury stock 1,216,000 Operating revenues 3,888,000 Cost of goods sold 1,920,000 Selling and administrative expenses 800,000 Depreciation expense 160,000 Other expense 256,000 Bad debt expense 14,400 Rent expense 320,000 Interest expense 141,568 Income tax expense 96,000 Totals 11,609,120 11,609,120 Use the information provided to work with your group to prepare: The income statement.The statement of retained earnings.The balance sheet.Ratios that can be calcuated from the data presented
Magic GMBA 5 Corporation
Adjusted Trial Balance December 31, 2019 $ Dr $ Cr Assets : Current assets : Cash 1,877,632 Accounts receivable 1,120,000 Allowance for bad debts 17,600 Inventory 1,440,000 Total current assets 4,420,032 Long term assets : Long term investment 348,800 Property, plant, and equipment 1,600,000 Accumulated depreciation 640,000 Total long term assets : 1,308,800 Total assets : 5,728,832 Current liabilities: Accounts payable 262,400 Accrued payables 192,000 Unearned revenues 256,000 Total current liabilities: 710,400 Long term liabilities: Other long term liability 170,848 Bonds payable 1,600,000 Discount on bonds payable 170,720 Deferred income tax 102,272 Total long term liabilities : 1,702,400 Total liabilities : 2,412,800 Shareholder equity : Preferred stock 1,600,000 Common stock 160,000 Additional paid-in capital 1,760,000 Retained earnings 960,000 Dividends 128,000 Treasury stock 1,216,000 Operating revenues 3,888,000 Cost of goods sold 1,920,000 Selling and administrative expenses 800,000 Depreciation expense 160,000 Other expense 256,000 Bad debt expense 14,400 Rent expense 320,000 Interest expense 141,568 Income tax expense 96,000 Profit : 180,032
Total shareholder equity : 3,316,032
Totals 11,609,120 11,609,120
Note: Profit to be added to balance sheet ,
Profit = operation revenues - Cost of goods sold - Selling and administrative expenses- Depreciation expense- Other expense - Bad debt expense - Rent expense - Interest expense - Income tax expense =180,032
Assets= Liabilities + shareholder equity
5,728,832 = 2,412,800 + 3,316,032
The income statement = operation revenues - Cost of goods sold - Selling and administrative expenses- Depreciation expense- Other expense - Bad debt expense - Rent expense - Interest expense - Income tax expense =180,032
Calculation Of Ratios--
1. Current Ratio= Current Assets/Current Liabilities=4,420,032 / 710,400 = 6.22
= 12.27 Comment: The current ratio of 12.27 indicates that Magic GMBA 4 Corporation has strong liquidity and is capable of meeting its short-term obligations.
2.Quick Ratio= Liquid Asset/Current Liabilities
Liquid asset= Current Asset except Inventory and prepaid expense=374704
= 0.75 Comment: The debt-to-equity ratio of 0.75 suggests that Magic GMBA 4 Corporation has a moderate level of debt compared to its equity, which is generally favorable.
