PART A: Nittany Lions Corporation adjusts its accounts only at year-end. The following information is available as a source for preparing adjusting entries at December 31, 2015.

On November 1, 2015, the company borrowed $120,000 for one year at 9% interest and recorded a full year of accrued interest expense. Interest is payable at maturity.

On October 1, 2015, Nittany Lions collected seven months rent in the amount of $10,500 in advance from the renter. At that date, the company debited Cash and credited Unearned Rent Revenue for $10,500.

The Supplies Inventory account had a $4,500 balance at the beginning of the year (January 1, 2015). During the year, $6,000 of supplieswere acquired, with the Supplies Expense account debited at the time of purchase. The supplies count at the end of the year (December 31, 2015) showed $5,000 of supplies is still on hand.

The company owes 6-month property taxes of $1,500 on land owned for 2015. The taxes will be paid when they are billed in February 2016. No related expense has been recorded.

Required:

For each of the above numbered items, prepare the necessary adjusting journal entry. If no adjusting entry is required, explain why. Put the adjusting journal entries in the worksheet titled Part A Answers to Part A.

If Nittany Lions failed to prepare necessary adjusting entries like you did in Requirement A, indicate the effect that each item will have on the companys financial statements for the year ended December 31, 2015. Use O for overstated, U for understated, and NE for no effect. Organize your answer in tabular form, using the column headings shown below and provided in the worksheet titled Part AAnswers to Part B.

Example 0: At year end, employees earned $4,000 in wages which will be paid on the next payroll date in January 2016. The adjusting journal entry will be:

Rent Expense (+E, -NI, -R/E, -SE) 4,000

Salaries Payable (+L) 4,000

	Income Statement		Balance Sheet
Adjusting entry	Revenue -	Expense	= Net Income		Assets =	Liabilities +	Stockholders Equity
0	NE	U	O		NE	U	O
1
Etc.

PART B: During 2015, LX Corporation added a new product line to its production and sales. LX Corporations Balance Sheet and Income Statement is provided in the Homework #4 Student Workbook in the worksheet titled Part B Financials.

Required:

Calculate the following ratios for both 2015 and 2014. Round your answers to 3 decimal places. In 2-3 sentences each, discuss your interpretation of the change in each ratio across the two years, in light of the product line improvement. Put your answers in the worksheet titled Part B Answer.

Debt to Asset Ratio

Asset Turnover Ratio

Net Profit Margin

Total assets were $345,000 on December 31, 2013.