SmartBook retained earnings formula x Chapter 4 Problems CAezto.mheducation.com/

Question

SmartBook retained earnings formula x Chapter 4 Problems CAezto.mheducation.com/hm.tpx use to assess profitability value: 2.00 points 4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2015. (Round your answers to 2 decimal places.) Current ratio Acid-test ratio Gross margin ratio : References eBook & Resources Worksheet Learning Objective: 04-A1 Compute Learning Objective: 04-p the acid-test ratio and explain its usemerchandising company to assess liquidity Difficulty: 3 Hard Learning Objective: 04-A2 ComputeLearming Objective: 04-P4 the gross margin ratio and explain its Leaming Objective: 04-A2 ComputeLoamin

Explanation / Answer

(note : given in question rent expense and salaries expense are equally divided between selling and general addministative expenses)

Current ration = current assets/ current liabilitieis

Current assets

Current ratio   = $29,650/13,000   = 2.28

Acid test ratio   = (16,700 + 1750)/13,000 = 1.42

Gross profit = 69,400/111,100   = 62.47%

Sales 115,000 less:Sales discount 1,800 Sales return and allowances 2,100     3,900 Net sales 111,100 less:Cost of goods sold (38,000+3700) 41,700 Gross profit 69,400 Expenses: Selling expenses Advertinsing expense 10,000 Depreciation expense - Store 1,575 Rent expense 9,000 Sales Salaries expense 12,650 Store supplies expense    3,750 total selling expense $36,975 General and Administrative expense insurance expense    1,600 Rent expense - Office space    9,000 Administrative salaries expense 12,650 total generla and administrative expense 23,250 total expense $60,225

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