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(Solution) - Lily May Electronics recognizes expenses for wages interest an

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Lily May Electronics recognizes expenses for wages, interest, and rent when cash payments are made. The following related cash payments were made during December 2011.
1. December 1 Paid $1,100 for rent to cover the subsequent twelve months.
2. December 5 and 20 Paid wages in the amount of $7,500. Wages in the amount of $7,500 are paid on the fifth and the twentieth of each month for the fifteen days just ended. The next payment will be on January 5, 2012.
3. December 15 Paid $600 interest on an outstanding note payable. The note has face value of $10,000 and a 12 percent annual interest rate. Interest payments in the amount of $600 are made every six months.
As of December 31, the current assets and current liabilities reported on Lily May?s balance sheet were $24,000 and $15,000, respectively. Lily May?s income statement reported net income of $7,500.
Compute Lily May?s current ratio and net income if the company were to account for wages, interest, and rent on an accrual basis.


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