Chapter 3, Problem 3.78DC

LO 3, 6

(Learning Objectives 3, 6: Adjust the accounts; analyze and evaluate liquidity) The unadjusted trial balance of Stone Park Services, Inc., at January 31, 2019, does not balance. The list of accounts and their balances follows. The trial balance needs to be prepared and adjusted before the financial statements at January 31, 2019, can be prepared. The manager of Stone Park Services also needs to know the business’s current ratio.

Cash....................................................	$ 8,000
Accounts receivable.............................	4,200
Supplies...............................................	800
Prepaid rent.........................................	1,200
Land....................................................	43,000
Accounts payable................................	12,000
Salary payable.....................................	0
Unearned service revenue....................	700
Note payable, due in three years.........	23,400
Common stock....................................	5,000
Retained earnings................................	9,300
Service revenue....................................	9,100
Salary expense.....................................	3,400
Rent expense.......................................	0
Advertising expense.............................	900
Supplies expense..................................	0

Requirements

1. 1. How much out of balance is the trial balance? Notes Payable (the only error) is understated.
2. 2. Stone Park Services needs to make the following adjustments at January 31:
   1. a. Supplies of $400 were used during January.
   2. b. The balance of prepaid rent was paid on January 1 and covers the entire calendar year of 2019. No adjustment was made on January 31.
   3. c. At January 31, Stone Park Services owed employees $1,000.
   4. d. Unearned service revenue of $500 was earned during January.

  Prepare a corrected, adjusted trial balance. Give Notes Payable its correct balance.

1. 3. After the error is corrected and after these adjustments are made, calculate and analyze the current ratio of Stone Park Services, Inc. Analyze this current ratio.