QUESTION 4 (25 MARKS)

PART A (5 MARKS)

( i) A company reported current assets of $150,000, current liabilities of $100,000 and total assets of $450,000; therefore, the: (a) Amount of working capital was $_____________________. (1 MARK) (b) Working capital ratio was $_________________________. (1 MARK)

PART (ii) The following transactions were completed by a corporation: (a) At the beginning of the year issued $25,000, 10 percent bonds payable (interest payable annually), due in 10 years, for $24,000 cash. Any bond premium or discount will be amortized on the straight-line basis. Give the entry to record the first interest payment. ( 1 MARK)

(b) Issued 3,500 shares of its common shares and received cash, $17,500, which was credited in full to the common shares subscribed account. Give the required correcting entry. (1 MARK)

(c) The working capital ratio for the company at the end of year one was 1.5 and the current assets, $156,750. Therefore, the current liabilities amounted to $______________________. (1 MARK)