X i Requirements 1. Make Bull Ranch Company's closing entries at December 31, 2018. Explain what they accomplish and why they are necessary. 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. 3. Prepare Bull Ranch Company's classified balance sheet to identify the company's current assets and current liabilities. (The company has no long-term liabilities. Use the account format. Then compute the company's net working capital, current ratio, and debt ratio at December 31, 2018. 4. Bull Ranch Company's top managers have asked you for a $550,000 loan to expand the business and propose to pay off the loan over a 10-year period. Recalculate Bull 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%. Bull Ranch Company's cash flow is strong. Give the reasoning underlying your decision. Income Statement - Bull Ranch Company Income Statement Year Ended December 31, 2018 Revenue: Service revenue $ 320,000 Expenses: Salary expense $ 189,000 Depreciation expensefurniture and fixtures 17,000 Depreciation expense-building 19,000 Supplies expense 1,500 Miscellaneous expense 10,000 236,500 Income before tax 83,500 Income tax expense 34,000 $ 49,500 Net income 1 i Adjusted Trial Balance Bull Ranch Company Adjusted Trial Balance December 31, 2018 Account Debit Credit Cash $ 202,000 Accounts receivable 320,000 Supplies 1,500 Building 300,000 Accumulated depreciation- building $ 119,000 Furniture and fixtures 125,000 Accumulated depreciation, furniture and fixtures 72,000 Accounts payable 320,000 Salary payable 9,000 Unearned service revenue 13,000 Income tax payable 34,000 Common stock 140,000 Retained earnings 262,000 262,000 70,000 320,000 189,000 1,500 Retained earnings Dividends Service revenue Salary expense Supplies expense Depreciation expense- building Depreciation expense- furniture and fixtures Income tax expense Miscellaneous expense 19,000 17,000 34,000 10,000 Total $ 1,289,000 1,289,000 i Statement of Retained Earnings Bull Ranch Company Statement of Retained Earnings Year Ended December 31, 2018 Retained earnings, December 31, 2017 Add: Net income Subtotal $ 262,000 49,500 311,500 (70,000) Less: Dividends $ 241,500 Retained earnings, December 31, 2018 Balance Sheet X 1 Assets Cash Accounts receivable Supplies Building Less: Accum. depr.building Furniture and fixtures Less: Accum. depr.furniture and fixtures Bull Ranch Company Balance Sheet December 31, 2018 Liabilities $ 202,000 Accounts payable 320,000 Salary payable 1,500 Unearned service revenue 300,000 Income tax payable (119,000) 181,000 Total liabilities 125,000 (72,000) 53,000 Stockholders' Equity Common stock Retained earnings Total stockholders' equity 757,500 Total liabilities and stockholders' equity $ 320,000 9,000 13,000 34,000 376,000 140,000 241,500 381,500 $ 757,500 Total assets Requirement 1. Make Bull Ranch Company's closing entries at December 31, 2018. Explain what they accomplish and why they are necessary. Record the closing entries for Bull Ranch Company at December 31, 2018. Begin by closing the revenue account. Journal Entry Date Accounts Debit Credit (Cloa) Dec 31 Next, close the expense accounts. Journal Entry Accounts Date Debit Credit (Clob) 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. 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 262,000 Requirement 3. Prepare Bull Ranch Company's classified balance sheet to identify the company's current assets and current liabilities. The company has no long-term liabilities.) Use the account format. Then compute the company's net working capital, current ratio, and debt ratio at December 31, 2018. Start with the balance sheet. Complete the assets portion of the statement in this step, and then complete the liabilities and stockholders' equity portion of the statement in the following step. (Abbreviations used: Accum. depr. = accumulated depreciation, Depr. exp. = depreciation expense.) Assets Current assets: Bull Ranch Company Balance Sheet December 31, 2018 Liabilities Current liabilities: Accounts payable Salary payable Unearned service revenue Income tax payable Total current liabilities Cash Accounts receivable Supplies Total current assets Less: Accum. depr.-building Less: Accum. depr.-furniture and fixtures Stockholders' Equity Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Total assets Compute the company's net working capital, current ratio, and debt ratio at December 31, 2018. (Round the ratios to two decimal places.) Select the labels, then enter the amounts to compute net working capital. Total current assets Total current liabilities Net working capital Select the labels, then enter the amounts to compute the current ratio. Total assets Total liabilities Current ratio Select the labels, then enter the amounts to compute the debt ratio. Total liabilities Total assets Debt ratio Requirement 4. Bull Ranch Company's top managers have asked you for a $550,000 loan to expand the business and propose to pay off the loan over a 10-year period. Recalculate Bull 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%. Bull Ranch Company's cash flow is strong. Give the reasoning underlying your decision. (Round ratio to two decimal places.) Bull Ranch Company's debt ratio assuming the loan 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% Bull Ranch Company's cash flow is strong. Give the reasoning underlying your decision. (Assume that the average debt ratio for a company similar to Bull 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 mid-range rate; if both indicators are weak, choose the higher rate.) Based on the company's financial position and increase in its debt ratio, Bull Ranch The reflects the company's financial position with the addition of the Iann hut niven the namnanu's nriar financial naeition and trann och flow it ho hlata ranau tha laan The V reflects the company's financial position with the addition of the Based on the company's financial position and increase in its debt ratio, Bull Ranch loan, but given the company's prior financial position and strong cash flow, it be able to repay the loan. X i Requirements 1. Make Bull Ranch Company's closing entries at December 31, 2018. Explain what they accomplish and why they are necessary. 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. 3. Prepare Bull Ranch Company's classified balance sheet to identify the company's current assets and current liabilities. (The company has no long-term liabilities. Use the account format. Then compute the company's net working capital, current ratio, and debt ratio at December 31, 2018. 4. Bull Ranch Company's top managers have asked you for a $550,000 loan to expand the business and propose to pay off the loan over a 10-year period. Recalculate Bull 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%. Bull Ranch Company's cash flow is strong. Give the reasoning underlying your decision. Income Statement - Bull Ranch Company Income Statement Year Ended December 31, 2018 Revenue: Service revenue $ 320,000 Expenses: Salary expense $ 189,000 Depreciation expensefurniture and fixtures 17,000 Depreciation expense-building 19,000 Supplies expense 1,500 Miscellaneous expense 10,000 236,500 Income before tax 83,500 Income tax expense 34,000 $ 49,500 Net income 1 i Adjusted Trial Balance Bull Ranch Company Adjusted Trial Balance December 31, 2018 Account Debit Credit Cash $ 202,000 Accounts receivable 320,000 Supplies 1,500 Building 300,000 Accumulated depreciation- building $ 119,000 Furniture and fixtures 125,000 Accumulated depreciation, furniture and fixtures 72,000 Accounts payable 320,000 Salary payable 9,000 Unearned service revenue 13,000 Income tax payable 34,000 Common stock 140,000 Retained earnings 262,000 262,000 70,000 320,000 189,000 1,500 Retained earnings Dividends Service revenue Salary expense Supplies expense Depreciation expense- building Depreciation expense- furniture and fixtures Income tax expense Miscellaneous expense 19,000 17,000 34,000 10,000 Total $ 1,289,000 1,289,000 i Statement of Retained Earnings Bull Ranch Company Statement of Retained Earnings Year Ended December 31, 2018 Retained earnings, December 31, 2017 Add: Net income Subtotal $ 262,000 49,500 311,500 (70,000) Less: Dividends $ 241,500 Retained earnings, December 31, 2018 Balance Sheet X 1 Assets Cash Accounts receivable Supplies Building Less: Accum. depr.building Furniture and fixtures Less: Accum. depr.furniture and fixtures Bull Ranch Company Balance Sheet December 31, 2018 Liabilities $ 202,000 Accounts payable 320,000 Salary payable 1,500 Unearned service revenue 300,000 Income tax payable (119,000) 181,000 Total liabilities 125,000 (72,000) 53,000 Stockholders' Equity Common stock Retained earnings Total stockholders' equity 757,500 Total liabilities and stockholders' equity $ 320,000 9,000 13,000 34,000 376,000 140,000 241,500 381,500 $ 757,500 Total assets Requirement 1. Make Bull Ranch Company's closing entries at December 31, 2018. Explain what they accomplish and why they are necessary. Record the closing entries for Bull Ranch Company at December 31, 2018. Begin by closing the revenue account. Journal Entry Date Accounts Debit Credit (Cloa) Dec 31 Next, close the expense accounts. Journal Entry Accounts Date Debit Credit (Clob) 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. 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 262,000 Requirement 3. Prepare Bull Ranch Company's classified balance sheet to identify the company's current assets and current liabilities. The company has no long-term liabilities.) Use the account format. Then compute the company's net working capital, current ratio, and debt ratio at December 31, 2018. Start with the balance sheet. Complete the assets portion of the statement in this step, and then complete the liabilities and stockholders' equity portion of the statement in the following step. (Abbreviations used: Accum. depr. = accumulated depreciation, Depr. exp. = depreciation expense.) Assets Current assets: Bull Ranch Company Balance Sheet December 31, 2018 Liabilities Current liabilities: Accounts payable Salary payable Unearned service revenue Income tax payable Total current liabilities Cash Accounts receivable Supplies Total current assets Less: Accum. depr.-building Less: Accum. depr.-furniture and fixtures Stockholders' Equity Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Total assets Compute the company's net working capital, current ratio, and debt ratio at December 31, 2018. (Round the ratios to two decimal places.) Select the labels, then enter the amounts to compute net working capital. Total current assets Total current liabilities Net working capital Select the labels, then enter the amounts to compute the current ratio. Total assets Total liabilities Current ratio Select the labels, then enter the amounts to compute the debt ratio. Total liabilities Total assets Debt ratio Requirement 4. Bull Ranch Company's top managers have asked you for a $550,000 loan to expand the business and propose to pay off the loan over a 10-year period. Recalculate Bull 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%. Bull Ranch Company's cash flow is strong. Give the reasoning underlying your decision. (Round ratio to two decimal places.) Bull Ranch Company's debt ratio assuming the loan 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% Bull Ranch Company's cash flow is strong. Give the reasoning underlying your decision. (Assume that the average debt ratio for a company similar to Bull 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 mid-range rate; if both indicators are weak, choose the higher rate.) Based on the company's financial position and increase in its debt ratio, Bull Ranch The reflects the company's financial position with the addition of the Iann hut niven the namnanu's nriar financial naeition and trann och flow it ho hlata ranau tha laan The V reflects the company's financial position with the addition of the Based on the company's financial position and increase in its debt ratio, Bull Ranch loan, but given the company's prior financial position and strong cash flow, it be able to repay the loan