Homework SourseThis T 2018 122000 108000 Merchandise Inventory 315000 23200
Solution
Answer a.
Current Ratio = Current Assets / Current Liabilities
2018:
Current Assets = Cash + Short-term Investments + Net Accounts Receivables + Merchandise Inventory
Current Assets = $56,000 + $31,000 + $122,000 + $247,000
Current Assets = $456,000
Current Ratio = $456,000 / $315,000
Current Ratio = 1.45
2017:
Current Assets = Cash + Short-term Investments + Net Accounts Receivables + Merchandise Inventory
Current Assets = $55,000 + $0 + $106,000 + $296,000
Current Assets = $457,000
Current Ratio = $457,000 / $232,000
Current Ratio = 1.97
Answer b.
Cash Ratio = Cash / Current Liabilities
2018:
Cash Ratio = $56,000 / $315,000
Cash Ratio = 0.18
2017:
Cash Ratio = $55,000 / $296,000
Cash Ratio = 0.19
Answer c.
Acid-test Ratio = (Current Assets - Merchandise Inventory) / Current Liabilities
2018:
Acid-test Ratio = ($456,000 - $247,000) / $315,000
Acid-test Ratio = 0.66
2017:
Acid-test Ratio = ($457,000 - $296,000) / $232,000
Acid-test Ratio = 0.69
Answer d.
Debt Ratio = Total Liabilities / Total Assets
2018:
Total Liabilities = Current Liabilities + Long-term Notes Payable
Total Liabilities = $315,000 + $36,000
Total Liabilities = $351,000
Debt Ratio = $351,000 / $585,000
Debt Ratio = 0.60
2017:
Total Liabilities = Current Liabilities + Long-term Notes Payable
Total Liabilities = $232,000 + $64,000
Total Liabilities = $296,000
Debt Ratio = $296,000 / $505,000
Debt Ratio = 0.59
Answer e.
Debt to equity = Total Liabilities / Total Equity
2018:
Total Equity = Total Assets - Total Liabilities
Total Equity = $585,000 - $351,000
Total Equity = $234,000
Debt to equity = $351,000 / $234,000
Debt to equity = 1.50
2017:
Total Equity = Total Assets - Total Liabilities
Total Equity = $505,000 - $296,000
Total Equity = $209,000
Debt to equity = $296,000 / $209,000
Debt to equity = 1.42
