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LOGIC COMPANY Comparative Income Statement For Years Ended December 31, 2014 and

ID: 2384453 • Letter: L

Question

LOGIC COMPANY
Comparative Income Statement
For Years Ended December 31, 2014 and 2015
2015 2014   Gross sales $ 19,000      $ 15,000   Sales returns and allowances 1,000      100   Net sales $ 18,000      $ 14,900   Cost of merchandise (goods) sold 12,000      9,000   Gross profit $ 6,000      $ 5,900   Operating expenses:      Depreciation $ 700      $ 600      Selling and administrative 2,200      2,000      Research 550      500      Miscellaneous 360      300        Total operating expenses $ 3,810      $ 3,400   Income before interest and taxes $ 2,190      $ 2,500   Interest expense 560      500   Income before taxes $ 1,630      $ 2,000   Provision for taxes 640      800   Net income $ 990      $ 1,200 LOGIC COMPANY
Comparative Balance Sheet
December 31, 2014 and 2015
2015 2014 Assets   Current assets:      Cash $ 12,000      $ 9,000      Accounts receivable 16,500      12,500      Merchandise inventory 8,500      14,000      Prepaid expenses 24,000      10,000        Total current assets $ 61,000      $ 45,500   Plant and equipment:      Building (net) $ 14,500      $ 11,000      Land 13,500      9,000        Total plant and equipment $ 28,000      $ 20,000   Total assets $ 89,000      $ 65,500 Liabilities   Current liabilities:      Accounts payable $ 13,000      $ 7,000      Salaries payable 7,000      5,000        Total current liabilities $ 20,000      $ 12,000   Long-term liabilities:      Mortgage note payable 22,000      20,500        Total liabilities $ 42,000      $ 32,500   Stockholders’ Equity   Common stock $ 21,000      $ 21,000   Retained earnings 26,000      12,000          Total stockholders’ equity      $ 47,000      $ 33,000   Total liabilities and stockholders’ equity $ 89,000      $ 65,500 Calculate the Acid test ratio. (Round your answers to the nearest hundredth.) 2015 2014   Acid test ratio LOGIC COMPANY
Comparative Income Statement
For Years Ended December 31, 2014 and 2015
2015 2014   Gross sales $ 19,000      $ 15,000   Sales returns and allowances 1,000      100   Net sales $ 18,000      $ 14,900   Cost of merchandise (goods) sold 12,000      9,000   Gross profit $ 6,000      $ 5,900   Operating expenses:      Depreciation $ 700      $ 600      Selling and administrative 2,200      2,000      Research 550      500      Miscellaneous 360      300        Total operating expenses $ 3,810      $ 3,400   Income before interest and taxes $ 2,190      $ 2,500   Interest expense 560      500   Income before taxes $ 1,630      $ 2,000   Provision for taxes 640      800   Net income $ 990      $ 1,200

Explanation / Answer

CALCULATION OF ACID TEST RATIO:

ACID TEST RATIO

2015

2014

(CASH + ACCOUNT RECEIVABLE + SHORT TERM INVESTMENT)/ CURRENT LIABILITIES

                                   1.43

                                1.79

(12000+16500)/20000

(9000+12500)/12000

ACID TEST RATIO

2015

2014

(CASH + ACCOUNT RECEIVABLE + SHORT TERM INVESTMENT)/ CURRENT LIABILITIES

                                   1.43

                                1.79

(12000+16500)/20000

(9000+12500)/12000