It was a two part question I’m on the ratio part I put first section with the gr

Question

It was a two part question I’m on the ratio part I put first section with the green checks Salaries expense Insurance expense 26,980 17,800 Store supplies expense Advertising expense Totals $166,050 $166,850 Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Nelson Company uses a perpetual inventory system. Additional Information: a. Store supplies still available at fiscal year-end amount to $2.150 b. Expired insurance, an administrative expense, for the fiscal year is $1,600 c. Depreciation expense on store equipment, a selling expense, is $1.525 for the fiscal year d. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10.900 of inventory is stil available at fiscal year-end. ent ratio, acid-test ratio, and gross margin ratio as of January 31.2017, (Round your answers to 2 decimal places) 4. Compute the current ratio, acid-test ratio, and gross margin ratio as ratio Next

Explanation / Answer

From the given information, the following balances of accounts are extracted:

Sales - $ 114,950

Gross Profit - $ 70,600;

Cash - $ 4,250;

Merchandise Inventory - $ 13,000 - $ 2,100 = $ 10,900;

Store Supplies - $ 5,400 - $ 3,250 = $ 2,150;

Prepaid Insurance - $ 2,700 - $ 1,600 = $ 1,100;

Accounts Payable - $ 16,000.

Current Ratio:

= Current Assets/ Current Liabilities

Current Assets = Cash + Merchandise Inventory + Store Supplies + Prepaid Insurance

Current Assets = $ 4,250 + $ 10,900 + $ 2,150 + $ 1,100

Current Assets = $ 18,400

Current Liabilities = Accounts Payable = $ 16,000.

Current Ratio = $ 18,400 / $ 16,000 = 1.15

Therefore, current ratio is 1.15.

Acid Test Ratio:

Acid Test Ratio = Liquid Assets/Current Liabilities.

Liquid Assets = Cash = $ 4,250

Current Liabilities = $ 16,000

Acid Test Ratio = $ 4,250 / $ 16,000

Acid Test Ratio = 0.265625

Acid Test Ratio = 0.27

Gross Margin Ratio:

Gross Margin Ratio = Gross Profit / Sales

Gross Profit = $ 70,600

Sales = $ 114,950

Gross Margin Ratio = $ 70,600 / $ 114,950

Gross Margin Ratio = 0.61418

Gross Margin Ratio is 0.61

Hope this is helpful!!

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