Answer all parts of questions showing formulas and calculations Thanks in advanc
ID: 2597343 • Letter: A
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Answer all parts of questions showing formulas and calculations Thanks in advance Question 4: LO: K1, K2 [10 marks] (A) Selected financial statement data for Stewart Company are presented below. December 31,2018 December 31,2017 Cash Short-term investments Receivables (net) Inventories Total current liabilities $45,000 27,000 135,000 90,000 135,000 $ 60,000 30,000 150,000 120,000 150,000 During 2018, net sales were $1,425,000, and cost of goods sold was $1,155,000. Required: Compute the following ratios on December 31, 2018: (5 marks) (a) Current (b) Acid-test (quick ratio). (c) Accounts receivable turnover. (d) Inventory turnover. (B) Identify the activities and users associated with accounting. (5 marks)Explanation / Answer
Answer to Part a)
Current Ratio = Current Assets / Current Liabilities
Current Assets = $60,000 + $30,000 + $150,000 + $120,000
Current Assets = $360,000
Current Liabilities = $150,000
Current Ratio = 360,000 / 150,000
Current Ratio = 2.4: 1
Answer to Part b)
Acid- Test Ratio = (Current Assets – Inventories) / Current Liabilities
Acid- Test Ratio = (360,000 – 120,000) / 150,000
Acid- Test Ratio = 240,000 / 150,000
Acid- Test Ratio = 1.6: 1
Answer to Part c)
Accounts Receivable Turnover = Net Sales / Average Accounts Receivable
Average Accounts Receivable = (150,000 + 135,000)/ 2
Average Accounts Receivable = $142,500
Accounts Receivable Turnover = 1,425,000 / 142,500
Accounts Receivable Turnover = 10 times
Answer to Part d)
Inventory Turnover = Cost of Goods sold / Average Inventory
Average Inventory = (120,000 + 90,000) / 2
Average Inventory = $105,000
Inventory Turnover = 1,155,000 / 105,000
Inventory Turnover = 11 times
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