Required information [The following information applies to the questions displayed below.] Business Allen Interiors Incorporated is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Business Allen's June 30, 2019, trial balance. (The amounts shown represent millions of dollars.) $ 116 27 134 24 360 170 220 Accounts Payable Accounts Receivable Cash Common Stock Equipment Inventory Notes Payable (long-term) Notes Payable (short- term) Prepaid Rent Retained Earnings Salaries and Wages Payable Software 3 26 377 37 60 Assume that the following events occurred in the following quarter. a. Paid $55 cash for additional inventory. b. Issued additional shares of common stock for $20 in cash. c. Purchased equipment for $260; paid $125 in cash and signed a note to pay the remaining $135 in two years. d. Signed a short-term note to borrow $12 cash. e. Conducted negotiations to purchase a sawmill, which is expected to cost $32. Required: 1-a. Calculate Business Allen's current ratio at June 30, 2019, prior to the transactions listed above. (Round your answer to 2 decimal places.) Current Ratio 1-b. Based on the above calculation and analysis of Noodlecake's current ratio 4.73, indicate which company is in a better position to pay liabilities as they come due in the next year. Business Allen Noodlecake 2. Analyze transactions (a)-(e) to determine their effects on the accounting equation. (Enter any decreases to account balances with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Assets Liabilities Stockholders' Equity Cash Inventory Equipment = Notes Payable (short- Notes Payable (long-term) + Common Stock term) + + | | 1111111111 + + + 3. Record the transaction effects determined in part 2 using journal entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) View transaction list Journal entry worksheet Paid $55 cash for additional inventory. Record the transaction. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry View general journal Clear entry 4. Summarize the journal entry effects from part 3 using T-accounts. Use the June 30, 2019, ending balances as the beginning balances for the July-September 2019 quarter. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Cash Credit Debit Beginning Balance Accounts Receivable Debit Credit Beginning Balance Ending Balance Ending Balance Inventory Credit Credit Debit Beginning Balance Prepaid Rent Debit Beginning Balance Ending Balance Ending Balance Equipment Software Credit Credit Debit Beginning Balance Debit Beginning Balance Ending Balance Ending Balance Accounts Payable Debit Beginning Balance Credit Salaries and Wages Payable Debit Credit Beginning Balance Ending Balance Ending Balance Notes Payable (short-term) Debit Credit Beginning Balance Notes Payable (long-term) Debit Credit Beginning Balance Ending Balance Ending Balance Common Stock Retained Earnings nalla Delis JI 5. With respect to event (e), which of the following is correct? Multiple Choice It does not involve exchange of cash, goods, or services. It does involve exchange of cash, goods, or services. 6. Prepare a classified balance sheet at September 30, 2019. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) BUSINESS ALLEN INTERIORS, INCORPORATED Balance Sheet (in millions of dollars) 7-a. Use your response to part 6 to calculate Business Allen's current ratio after the transactions listed in (a)-(e). 7-b. Compare Ethan Allen's current ratio at June 30, 2019 with its current ratio after the transactions listed in (a)-(e), and indicate whether the transactions increased or decreased the company's ability to pay current liabilities. Complete this question by entering your answers in the tabs below. Req 7A Req 7B Use your response to part 6 to calculate Business Allen's current ratio after the transactions listed in (a)-(e). (Round your answer to 2 decimal places.) Current ratio after transactions (a)- (e)
