Requirements 1. Compute these ratios for 2018 and 2017: a. Acid-test ratio (Roun

Question

Requirements 1. Compute these ratios for 2018 and 2017: a. Acid-test ratio (Round to two decimals.) b. Accounts receivable turnover (Round to two decimals.) c. Days’ sales in receivables (Round to the nearest whole day.) 2. Considering each ratio individually, which ratios improved from 2017 to 2018 and which ratios deteriorated? Is the trend favorable or unfavorable for the company? 1. Acid-test ratio (2018) 0.94 388 484F81 1A0947 43.JPO Dec. 1 Tusk Music dishonored its note at maturity 1 Wrote off the receivable associated with Tusk Music. (Use the allowance method.) 30 Collected the maturity value of the Lincoln Music note Journalize all transactions for CC Publishing Round all amounts to the nearest dollar P8-34A Using ratio data to evaluate a company's financial position financial statements of Norfolk Cosmetic Supply for 2018, 2017, and 2016 include the data shown here: 2018 2017 2016 Balance sheet-partial Current Assets: Cash Short-term investments Accounts Receivable, Net Merchandise Inventory Prepaid Expenses Total Current Assets S 70,000 60,000 50,000 120,000 260,000 310,000 35,000 835,000775,000 640,000 140,000 280,000 355,000 70,000 915,000 560,000 170,000 240,000 330,000 35,000 Total Current Liabilities Income statement-partial Net Sales (all on account) 630,000 5,890,000 5,130,0004,210,000

Explanation / Answer

1.

a.

b.

c

2.

Acid test ratio have improved to 0.88 from 0.75 in 2017.

Account Receivable turnover ratio is an indicator of the number of accounts receivable a

company collects during a year. Norflok Cosmetic Supply collects its receivables 22.65 times on average per year. Company has improved its performance by increasing its receivable average per year as compared to 2017.

Acid Test Ratio = Cash +Short term Investment + Account Receivable Current Liabilities 2018    2017 = 70,000+140000+280000 60000+170000+240000 560000 630000 = 0.88 0.75

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