# ACC 205 Week 5: Assignment

Satisfactory Essays
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) =

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