ACC 205 Week 5: Assignment

Week 5 – Assignment
Ilba Rodriguez
ACC 205: Principles of Accounting I
Prof. Theresa Murray
November 16, 2014
Problem 1 – Liquidity ratios.
A.

Edison
Stagg
Thornton
Current ratio
3.56
3.69
3.83
Quick ratio
3.06
2.78
2.5

Current ratio calculations:
Edison
($6,000 (cash) + $3,000 (short-term investments) + $2,000 (AR) + $1,000 (inventory) + $800 (prepaid expenses)) / ($200 (AP) + $3,100 (notes payable) + $300 (accrued payables)) = 3.56
Stagg
($5,000 (cash) + $2,500 (short-term investments) + $2,500 (AR) + $2,500 (inventory) + $800 (prepaid expenses)) / ($200 (AP) + $3,100 (notes payable) + $300 (accrued payables)) = 3.69
Thornton
($4,000 (cash) + $2,000 (short-term investments) + $3,000 (AR) + $4,000 (inventory) + $800 (prepaid expenses))
Current Liabilities have decreased in 20X2 with the exception of long-term liabilities, which has raised an additional $3,000 for the year. Cost of goods sold in 20X2 has lowered but the operating expenses has raised.

Problem 6 – Ratio computation.
a) ($400 (cash & short-term investments) +$ 3,000 (AR)) / $3,900 (current liabilities) = 0.87

b) $6,400 (current assets) / $3,900 (current liabilities) = 1.64

c) 20X2 = $3,000 and 20X1 = $2,300
$3,000 + $2,300 =
$5,300 / 2 = $2,650
20,000 (cost of goods sold) / 2,650 (average inventory) = 7.55

d) 20X2 = $3,000 and 20X1 = $2,400
$3,000 + $2,400 = $5,400
$5,400 / 2 = $2,700
$36,000 (net credit sales) / $2,700 (average net AR) = 13.33

e) 20X2 = $9,600 and 201 = $6,800
$9,600 + $6,800 = $16,400
$16,400 / 2 = $8,200
$3,600 (net income) / $8,200 (average assets) = 43.90

f) $3,600 (net income) / $36,000 (net sales) = 0.10

g) 20X2 = $1,600 and 20X1 = $ 1,100
$1,600 + $1,100 = $2,700
$2,700 / 2 = $1,350
$3,600 (net income) / $1,350 (average common stockholder’s equity) = 2.67

h) $8,000 (total liabilities) / $9,600 (total assets) =