The following data were taken from the comparative balance sheet of Osborn Siste

Question

The following data were taken from the comparative balance sheet of Osborn Sisters Company for the years ended December 31, 20Y9 and December 31, 2OY8: Dec. 31, 20Y9 $199,400 212,800 195,800 273,600 220,400 Dec. 31, 20Y8 $144,700 158,500 172,800 214,200 57,800 $748,000 $238,000 102,000 $340,000 Cash Temporary investments Accounts and notes receivable (net) Inventories Prepaid expenses Total current assets $1,102,000 $220,400 159,600 $380,000 Accounts payable Accrued liabilities Total current liabilities a. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. Round ratios to one decimal place 20Y9 20Y8 Working capital Current ratio Quick ratico b. The liquidity of Osborn Sisters Company has ratio have all from 20Y8 to the 20Y9. The working capital, current ratio, and quick Most of these changes are the result of

Explanation / Answer

20Y9 20Y8 Total Current Assets 1,102,000 748,000 Inventories 273600 214200 Prepaid expense 220400 57800 Total Liquid assets 608,000 476,000 (Total current assets-Inventories-Prepaid expense) Total Current liabilities 380,000 340,000 Working capital 722,000 408,000 (Current Assets -Current liabilities) Current ratio 2.9 2.2 (Current Assets/ Current Liabilities) Quick ratio 1.6 1.4 (Total liquid assets / Current liabilities) The Liquidity of Osborn sisters company has improved from 2008 to 2009. The working capital, current ratio, and quick ratio have all increased. Most of these changes are the result of an increase in current assets.

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