1 A The following transactions apply to Park Company for Year 1 Received $30,000 cash from the issue of common stock Purchased inventory on account for $144,000 Sold inventory for $173,500 cash that had cost $106,500 Sales tax was collected at the rate of 7 percent on the inventory sold Borrowed $19,200 from First State Bank on March 1, Year 1 The note had a 7 percent interest rate and a one year term to maturity Paid the accounts payable (see transaction 2) Paid the sales tax due on $144,000 of sales Sales tax on the other $29,500 is not due until after the end of the year Salaries for the year for one employee amounted to $27,000 Assume the Social Security tax rate is 6 percent and the Medicare tax rate is 1 5 percent Federal income tax withheld was $5,300 Paid $2,500 for warranty repairs during the year Paid $12,500 of other operating expenses during the year Paid a dividend of $5,000 to the shareholders Adjustments The products sold in transaction 3 were warranted Park estimated that the warranty cost would be 5 percent of sales Record the accrued interest at December 31, Year 1 Record the accrued payroll tax at December 31, Year 1 Assume no payroll taxes have been paid for the year and that the unemployment tax rate is 6 0 percent (federal unemployment tax rate is 0 60 percent and the state unemployment tax rate is 5 40 percent on the first $7,000 of earnings per employee) a Required a Record the preceding transactions in general journal form (If no entry is required for a transaction event, select No journal entry required in the first account field ) c 1 Prepare an income statement for Year 1 c 2 Prepare a statement of changes in stockholders equity for Year 1 c 3 Prepare a balance sheet for Year 1 c 4 Prepare a statement of cash flows for Year 1 1 B The following accounting information exists for Aspen and Willow companies Aspen Willow Cash $ 17,000 $ 27,000 Wages payable 19,500 22,500 Merchandise inventory 25,300 56,600 Building 50,000 100,000 Accounts receivable 32,650 32,375 Long term notes payable 80,000 110,000 Land 50,000 50,000 Accounts payable 37,000 44,000 Sales revenue 210,000 290,000 Expenses 190,000 240,000 Required a 1 Determine the amount of current assets and current liabilities for each company a 2 Compute the current ratio for each company b Assuming that all assets and liabilities are listed above, compute the debt to assets ratios for each company c 1 Determine which company has the greater financial risk in the short term c 2 Determine which company has the greater financial risk in the long term

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1-A The following transactions apply to Park Company for Year 1: Received $30,000 cash from the issue of common stock. Purchased inventory on account for

1-A

The following transactions apply to Park Company for Year 1:

Received $30,000 cash from the issue of common stock.
Purchased inventory on account for $144,000.
Sold inventory for $173,500 cash that had cost $106,500. Sales tax was collected at the rate of 7 percent on the inventory sold.
Borrowed $19,200 from First State Bank on March 1, Year 1. The note had a 7 percent interest rate and a one-year term to maturity.
Paid the accounts payable (see transaction 2).
Paid the sales tax due on $144,000 of sales. Sales tax on the other $29,500 is not due until after the end of the year.
Salaries for the year for one employee amounted to $27,000. Assume the Social Security tax rate is 6 percent and the Medicare tax rate is 1.5 percent. Federal income tax withheld was $5,300.
Paid $2,500 for warranty repairs during the year.
Paid $12,500 of other operating expenses during the year.
Paid a dividend of $5,000 to the shareholders.

Adjustments:

The products sold in transaction 3 were warranted. Park estimated that the warranty cost would be 5 percent of sales.
Record the accrued interest at December 31, Year 1.Record the accrued payroll tax at December 31, Year 1. Assume no payroll taxes have been paid for the year and that the unemployment tax rate is 6.0 percent (federal unemployment tax rate is 0.60 percent and the state unemployment tax rate is 5.40 percent on the first $7,000 of earnings per employee)

a.Required: a. Record the preceding transactions in general journal form. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

c-1. Prepare an income statement for Year 1. c-2. Prepare a statement of changes in stockholders equity for Year 1. c-3. Prepare a balance sheet for Year 1. c-4. Prepare a statement of cash flows for Year 1.

1-B

The following accounting information exists for Aspen and Willow companies.

	Aspen	Willow
Cash	$ 17,000	$ 27,000
Wages payable	19,500	22,500
Merchandise inventory	25,300	56,600
Building	50,000	100,000
Accounts receivable	32,650	32,375
Long-term notes payable	80,000	110,000
Land	50,000	50,000
Accounts payable	37,000	44,000
Sales revenue	210,000	290,000
Expenses	190,000	240,000

Required a-1. Determine the amount of current assets and current liabilities for each company. a-2. Compute the current ratio for each company. b. Assuming that all assets and liabilities are listed above, compute the debt-to-assets ratios for each company. c-1. Determine which company has the greater financial risk in the short term. c-2. Determine which company has the greater financial risk in the long term.