StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Current Ratio of Levy and Parcells - Assignment Example

Cite this document
Summary
The author in the first part of the paper examines a current ratio which uses to assess the stance meeting the short-term obligation. In the second part, the author gives the liabilities, payroll accounting and issuance of stock of Levy and Parcells …
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97.9% of users find it useful
Current Ratio of Levy and Parcells
Read Text Preview

Extract of sample "Current Ratio of Levy and Parcells"

Part-1 (journal) Current Liabilities is a function of Current Assets. A ratio which uses to assess the stance meeting the short term obligation is called Current Ratio. Current ratio use current assets and current liabilities. In finance, current means anything which has a life of one year or below one year. Organizations which meet with the short term obligations have wonderful track records. The psychological level of current ratio is 1 and the organization which scores above that number would be regarded as those organizations which meet with their short term obligations wonderfully (Ackerman, 2002). Current Ratio is an indication that the organization has the ability to tackle with its short term obligations. Due to the CR, an analyst get an idea that the organization has the tame to meet with it short term financial promises. Current means the financial promises which have a life of one or less than 1 year. From the above mentioned table and graph, it is very clear that The company is among those companies which meets with its short term financial promises pertinently. Throughout the analytical period, the CR of the company remained above the psychological level of 1 which is showing that the company is proactive towards meeting its short term financial promises. The CR of The company was way above the psychological level of 1 in the fiscal year 2001 which increased for two consecutive years by 38 and 15 basis points FY 2002 and 2003 respectively because of the augmentation in the current asset’s figures by 4.02% and 2.54% respectively. High fluctuation among the figures of CR, Current Assets and Current Liabilities has been envisaged throughout the selected analytical period. All of these three things came in positive and negative after every single or pair of years. The CR of the company remained in the congestion band from 1:5 to 2:8 except for one year in which the CR of the company touched the record level of 3:5 because of the increment in total current assets of the company by 66.50% in the fiscal year 2006. The average CR of The company is 2:26 which is way above the psychological level of 1 which is showing that the company always meets with its short term obligation plausibly. This provision can be extremely momentous from the standpoint of the company and its shareholders. Its time to move towards to second liquidity ratio which is quick ratio. Part-2 (Exercise Work) Liability 1. Partner investments; journal entries. The LP partnership was formed on January 1, 19X7, by investments from Bill Levy and Marv Parcells. Levy contributed $30,000 cash and $80,000 of land. Parcells contributed cash of $50,000 and equipment with a value of $20,000. a. Prepare the journal entries needed to record the investments of Levy and Parcells. Journal Entries Debit Cash $ 30,000 Land $ 80,000 Credit Capital (Levy) $ 110,000 Debit Cash $ 50,000 Equipment $ 20,000 Credit Capital (Parcells) $ 70,000 2. Payroll accounting. Assume that the following tax rates and payroll information pertain to Brookhaven Publishing: Social Security taxes: 6% on the first $55,000 earned Medicare taxes: 1.5% on the first $130,000 earned Federal income taxes withheld from wages: $7,500 State income taxes: 5% of gross earnings Insurance withholdings: 1% of gross earnings State unemployment taxes: 5.4% on the first $7,000 earned Federal unemployment taxes: 0.8% on the first $7,000 earned The company incurred a salary expense of $50,000 during February. All employees had earned less than $5,000 by month-end. a. Prepare the necessary entry to record Brookhaven’s February payroll. The entry will include deductions for the following: Social Security taxes Medicare taxes Federal income taxes withheld State income taxes Insurance withholdings Journal Entry Salary Expense (Debit) $ 50,000 Cash (Credit) $ 50,000 Social Security Tax Expense $ 3,000 Cash $ 3,000 Medicare Tax Expense $ 750 Cash $ 750 State Income Tax Expense $ 2,500 Cash $ 2,500 Insurance Expense $ 500 Cash $ 500 b. Prepare the journal entry to record Brookhaven’s payroll tax expense. The entry will include the following: Matching Social Security taxes Matching Medicare taxes State unemployment taxes Federal unemployment taxes Total Salary Expense = $ 50,000 Total Taxes = $ 6,750 Salary Expense (Debit) $ 50,000 Tax (Debit) $ 6,750 Cash (Credit) $ 56,750 3. Current liabilities: entries and disclosure. A review of selected financial activities of Visconti’s during 20XX disclosed the following: 12/1 Borrowed $20,000 from the First City Bank by signing a 3- month, 15% note payable. Interest and principal are due at maturity. 2/10 Established a warranty liability for the XY-80, a new product. Sales are expected to total 1,000 units during the month. Past experience with similar products indicates that 2% of the units will require repair, with warranty costs averaging $27 per unit. 12/22 Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30. 12/26 Borrowed $5,000 from First City Bank; signed a note payable due in 60 days. 12/31 Repaired six XY-80s during the month at a total cost of $162. 12/31 Accrued 3 days of salaries at a total cost of $1,400. Instructions a. Prepare journal entries to record the transactions. b. Prepare adjusting entries on October 31 to record accrued interest. c. Prepare the Current Liability section of Red Bank’s balance sheet as of October 31. Assume that the Accounts Payable account totals $203,600 on this date. a) 12/1 Cash $ 20,000 Account Payable (City Bank) $ 20,000 Cash $ 27,000 Net off Sales $ 540 Revenue $ 27,540 Merchandise $ 15,680 Discount $ 320 Account Payable (origon) $ 15,680 Cash $ 5,000 Account Payable (City Bank) $ 5,000 Repair Expense (X-80) $ 162 Cash $ 162 Accrued Salaries $ 1,400 Salaries Payable $ 1,400 b) Interest = 1,400 * 6% = $ 84 Interest Expense $ 84 Accrued Interest $ 84 c) Current Liabilities = $ 41,000 4. Issuance of stock: organization costs. Snowbound Corporation was incorporated in July. The firm’s charter authorized the sale of 200,000 shares of $10 par-value common stock. The following transactions occurred during the year: Instructions a. Prepare journal entries for the two stock issues. b. Prepare journal entries for the cash dividend declaration and payment. a) Cash 45000*18 = $ 154, 8000 Share Holders Capital $ 154,8000 Cash 20,000*22 = $ 440,000 Share Holders Capital $ 440,000 Total Shares Sold = 45,000 + 20,000 = 65,000 Total Dividend = 45,000 + 20,000 = $ 65,000 b) Dividend Expense $ 65,000 Cash $ 65,000 5. Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ending October 31: 8/2: Borrowed $75,000 from the Bank of Kingsville by signing a 120-day note. 8/20: Issued a $40,000 note to Harris Motors for the purchase of a $40,000 de­livery truck. The note is due in 180 days and carries a 12% interest rate. 9/10: Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed. 9/11: Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and car­ries a 14% interest rate. 10/10: The note to Pans Enterprises was paid in full. 10/31: The note to Datatex Equipment was paid in full. 11/30: Paid note to Bank of Kingville Instructions a. Prepare journal entries to record the transactions. b. Prepare adjusting entries on October 31 to record accrued interest. c. Prepare the Current Liability section of Red Bank’s balance sheet as of October 31. Assume that the Accounts Payable account totals $203,600 on this date. a) Cash $ 75,000 Capital (Kingsville) $ 75,000 Truck $ 40,000 Notes Payable $ 40,000 Merchandize $ 15,000 * 12% = 1800 = $ 13,200 A/C Payable (Pans Enterprises) $ 13,200 Datatex Equipment $ 60,000 * 14% = $ 8400 = $ 51,600 Notes Payable $ 51,600 Notes Payable (Pans Enterprises) $ 13,200 Cash $ 13,200 Notes Payable (Notes Payable) $ 51,600 Cash $ 51,600 Notes Payable (Kingsville) $ 75,000 Cash $ 75,000 b) Accrued Interest (Datex) $ 8,400 Cash $ 8,400 c) Current Liabilities = $ 118,000 References Andrew, S (2001), Strategic Management and Organizations, John Wiley and Sons Professional Publications Ackerman, R, (2002), Financial Management, Prentice Hall Publications, Bernard, R, Research Methods: (2006), Quantitative and Qualitative Research, McGraw Hill Publications Borodovsky, M & Gogarten, P, (2010), Financial Management Oxford Publications Blaxter, L & Hughes, C, (2006), Financial Management, McGraw Hill Publications, Umit, S and Carrier, A, (1998 Financial Management, Pearson Group Publications Ansari, S (2002), Financial Management, John Wiley Sons Professional Publications Ansoff, I (2007), Strategic Management, Oxford Publications Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Current Ratio of Levy and Parcells Assignment Example | Topics and Well Written Essays - 1500 words, n.d.)
Current Ratio of Levy and Parcells Assignment Example | Topics and Well Written Essays - 1500 words. Retrieved from https://studentshare.org/finance-accounting/1799634-exercise-assignment-wk4
(Current Ratio of Levy and Parcells Assignment Example | Topics and Well Written Essays - 1500 Words)
Current Ratio of Levy and Parcells Assignment Example | Topics and Well Written Essays - 1500 Words. https://studentshare.org/finance-accounting/1799634-exercise-assignment-wk4.
“Current Ratio of Levy and Parcells Assignment Example | Topics and Well Written Essays - 1500 Words”, n.d. https://studentshare.org/finance-accounting/1799634-exercise-assignment-wk4.
  • Cited: 0 times

CHECK THESE SAMPLES OF Current Ratio of Levy and Parcells

The Current Ratio

The current ratio measures the firm's ability to pay current debts from current assets.... In the given example, Pehr Weisengraf's company has this year's current ratio as 1.... times, or 70%, more money/resources than it has debts. … The quick ratio is similar to the current ratio, but is a more conservative measure of a company's liquidity.... current ratio The current ratio measures the firm's ability to pay current debts from current assets....
2 Pages (500 words) Essay

Capacity to Obtain Finances through Stocks

For example if the current ratio is above 1, it implies that the company is mathematically capable of paying its financial obligations (current ratio n.... Reference List current ratio n.... Efficiency ratio is the most important financial ratios category since it explains the effective and efficient use of assets to reach the optimal productivity.... sp Financial ratio Analysis n.... This is to regulate its fiduciary activities and to protect the interests of its current and prospective investors (Limited Company 2006)....
2 Pages (500 words) Essay

Financial Ration Analysis of FedEx Express

Liquidity refers to the ability of a company to pay its obligations on time or has the ability to convert its assets into ready cash when needed*A current ratio of $1 or higher indicates that the company is liquid enough to make timely payments.... A total debt ratio of $1 or less is a good sign that the investments made on the company are secured.... ample Computation of Ratios for FedEx Express and UPS, based on the financial statements for the year end 2007:Ratio and FormulaFedEx Express(in millions)UPS(in millions)Liquidity Ratio:current ratio = Current Assets Current Liabilities*Current Ratios show the liquidity of a business....
2 Pages (500 words) Essay

Thingamajigs and Things and Wannabees

If we divide the total current assets by the total current liabilities then we get a ratio of exactly 5 (Lane, 2011).... The two ratios that make The current ratio uses total current assets and total current liabilities.... Total current assets are divided by total current liabilities to give the current ratio.... In order to work out the current ratio for Thingamajigs and Things, we first need to find out the components of the equation so we can calculate the current ratio....
2 Pages (500 words) Essay

Pulp, Paper and Paperboard, Inc. ratio analysis

Ratio analysis Financial ratios for the year ended December Liquidity ratios current ratio = current assets/ current liabilities= 575000/345000=1.... Though the inventory turnover ratio improved in the year 2010, it fell in 2011.... 67Quick ratio= (current assets – inventory)/ current liabilities=332000/345000=0.... 81Debt ratiosDebt ratio= total debt/ total assets = 533000/ 1000000= 0.... 4 %The following table therefore summarizes the company's ratios from the year 2009 to the year 2011 and the industry's ratios for the year 2011 ratio 2009 2010 2011 2011__________________________________________________________________Current ratio 1....
2 Pages (500 words) Essay

Ratio analysis

The company's increasing ratio of 0.... Debt management requires that in case of a lower ratio, more savings should be done.... An increasing debt to equity ratio means that the company is being financed more by creditors' more than internal cash flow.... This… An increasing interest coverage ratio means that the company is gearing sufficient funds from its operations.... This implies that the company does not have to use the cash at hand to make up Financial Ratios Analysis Recommendation Debt to income ratio compares the amount owed to that earned....
1 Pages (250 words) Coursework

Financial ratio analysis

earnings per shareComparison between Qatar Oman company and Qatar Cinema CompanyFrom the computation of the leverage ratios, it is clear that Qatar Cinema Company has the highest debt ratio of 18.... The Qatar Oman Company has a liquidity ratio of 11.... The ratios are computed as Type of ratio Calculation (Qatar Oman company)Calculation (Qatar Cinema Company) current ratio = 11.... From the liquidity ratio, it is clear that Qatar Oman Company is proficient of paying its debts Finance and accounting [Insert al affiliation] The two companies that I have chosen for the Calculation of the financial ratios areQatar Oman and Qatar Cinema Company respectively....
1 Pages (250 words) Essay

Gear Ratio in Mechanisms

In the paper "Gear ratio in Mechanisms" the efficiency of the machine is determined by a number of principles and factors such as the gear ratio and the motive power impacted on the motor.... A higher gear ratio will be in a position to make the machine lift heavier weights compared to a lower gear ratio.... This is achieved through a proper combination of the gear ratio.... Gear ratio refers to the ratio in the angular velocity of the input gear and the output gear, which is brought about by the difference in the number of teeth between the two gears....
5 Pages (1250 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us