Badger Ranch Company Adjusted Trial Balance December 31, 2021 Account Debit Credit Cash $ 198,000 382,000 2,000 250,000 140,000 Accounts receivable Supplies Building Accumulated depreciation- building Furniture and fixtures Accumulated depreciation- furniture and fixtures Accounts payable Salary payable 100,000 60,000 380,000 5,000 Unearned service revenue 13,000 Badger Ranch Company Statement of Retained Earnings Year Ended December 31, 2021 Retained earnings, December 31, 2020 $ 193,000 71,000 Add: Net income Subtotal 264,000 (65,000) Less: Dividends $ 199,000 Retained earnings, December 31, 2021 Badger Ranch Company Income Statement Year Ended December 31, 2021 Revenue: $ 330,000 Service revenue Expenses: Salary expense Depreciation expensefurniture and fixtures $ 177,000 20,000 10,000 Depreciation expensebuilding Supplies expense 4,000 13,000 Miscellaneous expense 224,000 Income before tax 106,000 35,000 Income tax expense $ 71,000 Net income Badger Ranch Company Balance Sheet December 31, 2021 Assets Cash $ 198,000 Accounts receivable 382,000 2,000 Supplies Building $ 250,000 (140,000) Less: Accum. depr.building 110,000 Furniture and fixtures 100,000 (60,000) 40,000 Less: Accum. depr.furniture and fixtures $ 732,000 Total assets Requirement 1. Make Badger Ranch Company's closing entries at December 31, 2021. Explain what they accomplish and why they are necessary. (Record debits first, then credits. Exclude explanations from any journal entries.) Record the closing entries for Badger Ranch Company at December 31, 2021. Begin by closing the revenue account. Journal Entry Date Accounts Debit Credit (Clo a) Service Revenue Dec 31 Next, close the expense accounts. Journal Entry Date Accounts Debit Credit (Clo b) Dec 31 Now close the dividends account. Journal Entry Date Accounts Debit Credit (Cloc) Dec 31 Explain what the closing entries accomplish and why they are necessary. The closing entries set the balance of each revenue, expense, and dividend account We must close these accounts because Requirement 2. Post the closing entries to Retained Earnings and compare Retained Earnings' ending balance with the amount reported on the balance sheet. The two amounts should be the same. Post each entry using the appropriate closing entry label. Calculate the balance and enter the balance on the correct side of the account along with the "Bal" label. Review the closing entries prepared in Requirement 1. Retained Earnings 193,000 Compute the company's net working capital, current ratio, and debt ratio at December 31, 2021. (Round the ratios to two decimal places.) Select the labels, then enter the amounts to compute net working capital. Net working = capital Select the labels, then enter the amounts to compute the current ratio. = Current ratio : II Select the labels, then enter the amounts to compute the debt ratio. = Debt ratio Requirement 4. Badger Ranch Company's top managers have asked you for a $500,000 loan to expand the business and propose to pay off the loan over a 10-year period. Recalculate Badger Ranch Company's debt ratio assuming you make the loan. Use the company financial statements plus the ratio values to decide whether to grant the loan at an interest rate of 8%, 10%, or 12%. Badger Ranch Company's cash flow is strong. Give the reasoning underlying your decision. (Round ratio to two decimal places.) Badger Ranch Company's debt ratio assuming the loan is made is Use the company financial statements plus the ratio values to decide whether to grant the loan at an interest rate of 8%, 10%, or 12%. Badger Ranch Company's cash flow is strong. Give the reasoning underlying your decision. (Assume that the average debt ratio for a company similar to Badger Ranch ranges from 60% to 70%. If both indicators (cash flow and the debt ratio) are strong choose the lower rate; if one indicator is strong and the other is not, choose the d-range rate; if both indicators are weak, choose the higher rate.) Based on the company's financial position and increase in its debt ratio, Badger Ranch The reflects the company's financial position with the addition of the loan, but given the company's prior financial position and strong cash flow, it V be able to repay the loan