Answer to Question #213455 in Accounting for zuby

Question

Problem C Analysis of the transactions of the Moonlight Drive-In Theater for June 2010 disclosed thefollowing:

Ticket revenue USD 180000

Equipment rent expense 50000

Film rent expense 53400

Concession revenue 29600

Advertising expense 18600

Salaries expense 60000

Utilities expense 14100

Cash dividends declared and paid 12000

Balance sheet amounts at June 30 include the following:

Cash USD 140,000

Land 148000

Accounts payable 87600

Capital stock 114000

Retained earnings as of 2010 June 1 84900

a. Prepare an income statement for June 2010.

b. Prepare a statement of retained earnings for June 2010.

c. Prepare a balance sheet as of 2010 June 30.

d. How solvent does this company appear to be?

Answer 1

Solution:

They are as follows:

 

 

d.). To measure the solvency of the company, we use the solvency ratio, which is the current ratio, which is current assets divided by current liabilities. The company's current ratio is 1.19, which is a good solvency ratio as it shows that the company has more current assets than its current liabilities, meaning that it can be able to pay off its current liabilities.