N&R Associate Rosaline Nchang.

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Presentation transcript:

N&R Associate Rosaline Nchang

Loan & Terms Principal: $25000 loan Interest Rate: 10% Duration: 2years First payment: 07/01/15 Payment Amt: $10000 Current Ratio: Current Assets Current Liabilities Quick Ratio: Current Assets-Prepaid Working Capital: $10000 Min. Current Ratio: 1.8 Min. Quick Ratio: 1.6 If terms are not met, loan will be refinance at 15% Working Capital: Current Assets-Current Liabilities

Original Data Before Balance Sheet

Adjusting Entries Impact Balance Sheet Increase in AR by $1800 Decrease in construction Supplies Decrease in Prepaid Insurance Increase in Accumulated. Depreciation for both Equipment and Truck. Increase in AP Increase in Interest Payable. INCOME Increase in Service Revenue Increase Supplies Expense Increase in prepaid expense Increase in interest expense Increase in Dep. Expense for both Equipment and Truck.

After Adjustment Adjusted

Suggestions Increase cash sales to increase current assets To increase working capital and current ratio to the amount needed, $10,000 and 1.8:1, you need to contribute at least $2,000 from your pocket to pay off part of your accounts payable.

Suggestion 1 (Increase cash sales)

Suggestion 2 (Paid Accounts Payable)