(Learning Objectives 3, 6: Adjusting and correcting the accounts; computing and evaluating the current ratio) The unadjusted trial balance of Good Times, Inc., at January 31, 20X6, does not balance. In addition, the trial balance needs to be adjusted before the financial statements at January 31, 20X6 can be prepared. The manager of Good Times needs to know the business’s current ratio.
Unearned service revenue
Note payable, due in 3 years
1. How much out of balance is the trial balance? The error is in the Land account. ?
a. Supplies of $600 were used during January.
b. The balance of Prepaid Rent was paid on January 1 and covers the whole year 20X6. No adjustment was made on January 31.
c. At January 31, Good Times owes employees $400.
d. Unearned service revenue of $200 was earned during January.
Prepare a corrected, adjusted trial balance. Give Land its correct balance.
3. After the error is corrected and after these adjustments are made, compute the current ratio of Good Times, Inc. If your business had this current ratio, could you sleep at night?