Question

Mysnhu Login Calculator Print Item unts Payable and Cash Discounts Instructions Next Level Chart of Accounts General Journal Balance Sheet structions rd Company had the following transactions during 2016 and 2017: On December 24, 2016, a computer was purchased on account from Computers International for $60,000. Terms of the sale were 2/10, 1/30. 2 Byrd calculated that to forgo the discount for the computer would be the equivalent of paving 36% Interest annually for the extra 20 days. Therefore, Byrd went to First Local Bank and signed a $60,000, 30-day note at 12% in order to take advantage of the discount terms. This transaction took place on December 29, 2016. The account payable was paid on January 2, 2017 and the note was paid at maturity. Assume a 360-day year On December 30, 2016, Byrd declared a $2.00 cash dividend to the common shareholders. Ten thousand shares were outstanding on this date The dividend is to be paid on January 5, 2017. (Byrd Company charges dividends directly to retained earnings.) Required: Prepare the journal entries for Byrd for both 2016 and 2017 Assume that the net price methods used to account for the credit terms 2 Show hone preceding tems would be reported in the current antes section of Brols December 3 2016 balance sheet 3. Next Level Assuming Byro's current assets were 5H200 000 and current and was 24 at the end of 2016 compte trecuentrato at well end of 2015 based on the effects of the preceding tensions

Answer 1

1.

Date	Account Titles and Explanation	Debit	Credit
Dec. 24, 2016	Equipment-Computer [$60000 x (1-0.02)]	58800
	Accounts payable		58800
	(To record purchase of computer on account)
Dec. 29, 2016	Cash	60000
	Notes payable		60000
	(To record issuance of note payable)
Dec. 30, 2016	Retained earnings ($2.00 x 10000)	20000
	Dividends payable		20000
	(To record dividends declared)
Dec. 31, 2016	Interest expense ($60000 x 12% x 2/360)	40
	Interest payable		40
	(To record interest accrued on the note)
Jan. 2, 2017	Accounts payable	58800
	Cash		58800
	(To record payment on account)
Jan. 5, 2017	Dividends payable	20000
	Cash		20000
	(To record payment of dividends)
Jan. 28, 2017	Interest payable	40
	Interest expense ($60000 x 12% x 28/360)	560
	Notes payable	60000
	Cash		60600
	(To record payment on note and interest thereon on maturity)

2.

BYRD COMPANY
Balance Sheet (Partial)
December 31, 2016
Current liabilities
Accounts payable	58800
Notes payable	60000
Interest payable	40
Dividends payable	20000
Total current liabilities $	138840

3. Current ratio = Current assets/Current liabilities

End of 2015:

2.4 = $1200000/Current liabilities

Current liabilities = $1200000/2.4 = $500000

End of 2016:

Current assets = $1200000 + $60000 = $1260000

Current liabilities = $500000 + $58800 + $60000 + $20000 + $40 = $638840

Current ratio = $1260000/$638840 = 1.97

Kindly round off the current ratio as required since no instructions have been provided with the question regarding rounding off.