1) Based on the following data, what is the quick ratio, rounded to one decimal
ID: 2497825 • Letter: 1
Question
1) Based on the following data, what is the quick ratio, rounded to one decimal point?
Accounts payable
$ 30,000
Accounts receivable
65,000
Accrued liabilities
7,000
Cash
20,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
36,000
Notes payable (short-term)
20,000
Property, plant, and equipment
625,000
Prepaid expenses
2,000
a.
2.4
b.
3.4
c.
2.1
d.
1.5
2) A company with working capital of $400,000 and a current ratio of 2.5 pays a $75,000 short-term liability. The amount of working capital immediately after payment is
a.
$475,000
b.
$325,000
c.
$400,000
d.
$75,000
3) Based on the following data for the current year, what is the inventory turnover?
Net sales on account during year
$ 500,000
Cost of merchandise sold during year
330,000
Accounts receivable, beginning of year
45,000
Accounts receivable, end of year
35,000
Inventory, beginning of year
90,000
Inventory, end of year
110,000
a.
3.3
b.
8.3
c.
3.7
d.
3.0
4) The Rand Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year. The error was due to the accountant failing to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $5,000. Compute the year end retained earnings balance.
a.
$29,000
b.
$35,000
c.
$39,000
d.
$45,000
Accounts payable
$ 30,000
Accounts receivable
65,000
Accrued liabilities
7,000
Cash
20,000
Intangible assets
40,000
Inventory
72,000
Long-term investments
100,000
Long-term liabilities
75,000
Marketable securities
36,000
Notes payable (short-term)
20,000
Property, plant, and equipment
625,000
Prepaid expenses
2,000
Explanation / Answer
1)
Quick Ratio = Quick Asset/Current Liability
Quick Ratio = (Accounts receivable + Cash + Marketable securities)/(Accounts payable + Accrued liabilities + Notes payable (short-term))
Quick Ratio = (65000+20000+36000)/(30000+7000+20000)
Quick Ratio = 2.1
Answer
2.1
2)
Working capital = 400000
Current ratio = 2.5
Paid short-term liability = 75000
Amount of working capital immediately after payment = Working capital before payment - cash reduced + short-term liability decreased
Amount of working capital immediately after payment = 400000-75000+75000
Amount of working capital immediately after payment = 400000
Answer
c) 400000
3)
Inventory turnover = Cost of merchandise sold during year/Average inventory
Inventory turnover = 330000/ ((90000+110000)/2)
Inventory turnover = 3.30
Answer
a) 3.3
4)
Year end retained earnings balance = Beginning retained earnings balance - error to record depreciation expense + Net Income - cash dividends
Year end retained earnings balance = 25000- 3000 + 12000-5000
Year end retained earnings balance = 29000
Answer
a) 29000
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