accounting hw

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ACC 227: Principles of Accounting II

Module 2 Homework Assignment

Directions: Please use an Excel Spreadsheet to present your homework (note: if you have a Mac, you may use Pages). Accounting homework cannot be accomplished in Microsoft Word. Please use the presentations that have been provided with the course as reference. Also, you may use the Generic Working Papers Excel Workbook found in the Course Resources to complete this assignment. Please visit the Course Resources section. Please note that you may have additional written homework alongside these application assignments.

Please complete the following exercises found at the end Chapter 14:

• Problem Set A: Problem 14-6A
• Problem Set A: Problem 14-7A
• Problem Set B: Problem 14-6B
• Problem Set A: Problem 14-7B
• Beyond the Numbers: BTN 14-3
• Serial Problem: SP 14, Business Solutions (course-long project)

COURSE-LONG PROJECT DIRECTIONS: This course contains a course-long project in which you will work on a variety of problems in regards to a computer services company called Business Solutions. Each module will build upon one another, so it is important to complete each part successfully.

Please note that there are 8 total parts to the course-long project. You will have 1 week to complete each part.

This course-long project is a serial problem taken from your textbook. You can view the problem starting in Chapter 13. It will continue through Chapter 25. Please use the Generic Working Papers Excel Workbook found in the Course Resources to complete this project.

COURSE-LONG PROJECT: PART II (Module 2)

Scenario: On October 1, 2015, Santana Rey launched a computer services company, Business Solutions, that is organized as a proprietorship and provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2015.

Chapter 14: Serial Problem: SP 14, Business Solutions

Please complete the following:

Santana Rey has consulted with her local banker and is considering financing an expansion of her business by obtaining a long-term bank loan. Selected account balances at March 31, 2016, for Business Solutions follow.

Total Assets: $120,268

Total Liabilities: $875

Total Equity: $119,393

Required

• The bank has offered a long-term secured note to Business Solutions. The bank’s loan procedures require that a client’s debt-to-equity ratio not exceed 0.8. As of March 31, 2016, what is the maximum amount that Business Solutions could borrow from this bank (rounded to nearest dollar)?
• If Business Solutions borrows the maximum amount allowed from the bank, what percentage of assets would be financed (a) by debt and (b) by equity?
• What are some factors Santana Rey should consider before borrowing the funds?