Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 4ADM
A.
To determine
Ratio analysis
It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company.
Following are the two measures of liquidity:
- 1.
Current ratio : Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1. - 2. Quick ratio: Quick ratio measures the immediate debt paying capacity of a business, which can be measured by dividing quick assets by the current liabilities. Quick assets represent cash, readily marketable securities, and accounts receivable.
- 3.
Working capital : Total current assets minus total current liabilities are the working capital of a company.
To explain: The representation of “gift cards”, which is listed as current liabilities.
B.
To determine
To indicate: Whether the “credit card loans” can be considered as part of quick assets for Company C’s computation of the quick ratios.
C.
To determine
To compute: The current ratio for each company.
D.
To determine
To compute: The quick ratio for each company.
E.
To determine
To compare: The two companies results of current ratio and quick ratio.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Privett Company
Line Item Description
Amount
Accounts payable
$27,815
Accounts receivable
70,978
Accrued liabilities
6,525
Cash
22,970
Intangible assets
43,640
Inventory
74,446
Long-term investments
100,209
Long-term liabilities
78,528
Marketable securities
34,768
Notes payable (short-term)
25,264
Prepaid expenses
2,065
Property, plant, and equipment
646,687
Based on the data for Privett Company, what is the amount of working capital?
a. $205,227
b. $995,763
c. $128,716
d. $145,623
Selected financial data regarding current assets and current liabilities for Queen’s Line, a competitor in the cruise line industry, is provided:($ in millions)Current assets: Cash and cash equivalents $ 331 Current investments 63 Net receivables 230 Inventory 116 Other current assets 135Total current assets $ 875 Current liabilities: Accounts payable $1,025 Short-term debt 694 Other current liabilities 919 Total current liabilities $2,638Required:1. Calculate the current ratio and the acid-test ratio for Queen’s Line.
Selected financial data regarding current assets and current liabilities for Queen's Line, a competitor in the cruise line industry, is provided:
($ in millions)
Current assets:
Cash and cash equivalents
$
429
Current investments
94
Net receivables
224
Inventory
108
Other current assets
131
Total current assets
$
986
Current liabilities:
Accounts payable
$
1,010
Short-term debt
674
Other current liabilities
939
Total current liabilities
$
2,623
Required:
1. Calculate the current ratio and the acid-test ratio for Queen's Line. (Enter your answers in millions, not in dollars. For example, $5,500,000 should be entered as 5.5.)
Chapter 10 Solutions
Financial & Managerial Accounting
Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - To match revenues and expenses properly, should...Ch. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - When should the liability associated with a...Ch. 10 - Prob. 10DQ
Ch. 10 - Proceeds from notes payable On January 26, Nyree...Ch. 10 - Prob. 10.2BECh. 10 - Prob. 10.3BECh. 10 - Journalize payroll tax The payroll register of...Ch. 10 - Prob. 10.5BECh. 10 - Journalizing installment notes On the first day of...Ch. 10 - Prob. 10.7BECh. 10 - Prob. 10.1EXCh. 10 - Entries for notes payable Bennett Enterprises...Ch. 10 - Evaluating alternative notes A borrower has two...Ch. 10 - Entries for notes payable A business issued a...Ch. 10 - Entries for discounted note payable A business...Ch. 10 - Prob. 10.6EXCh. 10 - Prob. 10.7EXCh. 10 - Calculate payroll An employee earns 44 per hour...Ch. 10 - Prob. 10.9EXCh. 10 - Prob. 10.10EXCh. 10 - Payroll tax entries According to a summary of the...Ch. 10 - Payroll entries The payroll register for D. Salah...Ch. 10 - Prob. 10.13EXCh. 10 - Prob. 10.14EXCh. 10 - Prob. 10.15EXCh. 10 - Accrued vacation pay A business provides its...Ch. 10 - Pension plan entries Yuri Co. operates a chain of...Ch. 10 - Prob. 10.18EXCh. 10 - Entries for installment note transactions On the...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Prob. 10.21EXCh. 10 - Prob. 10.22EXCh. 10 - Prob. 10.23EXCh. 10 - Prob. 10.24EXCh. 10 - Liability transactions The following items were...Ch. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Wage and tax statement data on employer FICA tax...Ch. 10 - Prob. 10.4APRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 10.1BPRCh. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Prob. 10.3BPRCh. 10 - Prob. 10.4BPRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 3CPPCh. 10 - Continuing Company Analysis-Amazon: Short-term...Ch. 10 - Prob. 2ADMCh. 10 - Prob. 3ADMCh. 10 - Prob. 4ADMCh. 10 - Prob. 10.1TIFCh. 10 - Prob. 10.3TIF
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- SMOLIRA GOLF CORP. Balance Sheet as of December 31, 2015 ASSETS LIABILITIES & OWNER'S EQUITY Current Assets: Current Liabilities: Cash Rs.710 Accounts Payable Rs.1,215 Accounts Receivable 2106 Notes Payable 718 Inventory 4982 Other 230 Total Rs.7,798 Total C L Rs.2,163 Fixed Assets: Long-term debt Rs.4,190 Net plant and Equipment Rs.18,584 Owner's Equity: Common Stock and paid-in surplus Rs.10,000 Retained Earnings Rs.10,029 Total Rs.20,029 Total Assets Rs.26,382 Total Rs.26,382 SMOLIRA GOLF CORP. Income Statement as on December 31, 2011 Sales Rs.28,000 Less: Cost of goods sold 11,600…arrow_forwardSMOLIRA GOLF CORP. Balance Sheet as of December 31, 2015 ASSETS LIABILITIES & OWNER'S EQUITY Current Assets: Current Liabilities: Cash Rs.710 Accounts Payable Rs.1,215 Accounts Receivable 2106 Notes Payable 718 Inventory 4982 Other 230 Total Rs.7,798 Total C L Rs.2,163 Fixed Assets: Long-term debt Rs.4,190 Net plant and Equipment Rs.18,584 Owner's Equity: Common Stock and paid-in surplus Rs.10,000 Retained Earnings Rs.10,029 Total Rs.20,029 Total Assets Rs.26,382 Total Rs.26,382 SMOLIRA GOLF CORP. Income Statement as on December 31, 2011 Sales Rs.28,000 Less: Cost of goods sold 11,600…arrow_forwardCarla Vista Co. has these comparative balance sheet data: CARLA VISTA CO.Balance SheetsDecember 31 2022 2021 Cash $ 16,140 $ 32,280 Accounts receivable (net) 75,320 64,560 Inventory 64,560 53,800 Plant assets (net) 215,200 193,680 $371,220 $344,320 Accounts payable $ 53,800 $ 64,560 Mortgage payable (15%) 107,600 107,600 Common stock, $10 par 150,640 129,120 Retained earnings 59,180 43,040 $371,220 $344,320 Additional information for 2022: 1. Net income was $32,500. 2. Sales on account were $392,900. Sales returns and allowances amounted to $27,300. 3. Cost of goods sold was $217,300. 4. Net cash provided by operating activities was $57,200. 5. Capital expenditures were $30,000, and cash dividends were $19,000. Compute the following ratios at December 31, 2022. (Round current ratio and inventory turnover to 2 decimal…arrow_forward
- Selected financial data regarding current assets and current liabilities for ACME Corporation and Wayne Enterprises, are as follows: ($ in millions) ACME Corporation Wayne Enterprises Current assets: Cash and cash equivalents $519 $185 Current investments 7 461 Net receivables 618 106 Inventory 10, 645 7,609 Other current assets 1,251 155 Total current assets $13,040 $8,516 Current liabilities: Current debt $7,621 $4,464 Accounts payable 1,707 961 Other current liabilities 1, 148 2,552 Total current liabilities $10,476 $7,977 Required: 1-a. Calculate the current ratio for ACME Corporation and Wayne Enterprises. 1-b. Which company has the more favorable ratio? 2-a. Calculate the acid-test (quick) ratio for ACME Corporation and Wayne Enterprises. 2-b. Which company has the more favorable ratio?arrow_forwardSelected financial data regarding current assets and current liabilities for ACME Corporation and Wayne Enterprises, are as follows: ACME Corporation Wayne EnterprisesCurrent assets:Cash and cash equivalents $ 2,494 $ 541Current investments 125Net receivables 1,395 217Inventory 10,710 8,600Other current assets 773 301Total current assets $15,372 $9,784Current liabilitiesCurrent debt $ 1,321 $ 47Accounts payable 8,871 5,327Other current liabilities 1,270 2,334Total current…arrow_forwardFinancial Accounting C.Mulford: Financial Statement Analysis: 17 Borrowing oneself Into Financial Health? A condensed balance sheet for CSV Corp. is provided below. Calculate the current and quick ratios. Assume CSV borrowed $15,000 using long-term debt. Recalculate the company's current and quick ratios. CSV Corp. balance sheet (amounts in thousands): Cash Accounts receivable Inventory Total current assets Property, plant and equipment Total assets 2017 $1,400 3,600 5.800 10,800 10,200 $ 21.000 Accounts payable Accrued expenses payable Total current liabilities Long-term debt Shareholders' equity Total liabilities and shareholders' equity Calculated current ratio: Calculated quick ratio: Assume $15,000 borrowed using long-term debt: Revised current ratio: Revised quick ratio: $ 4,200 6.400 10,600 4,400 6,000 $ 21.000arrow_forward
- Condensed financial data of Coronado Inc. follow. CORONADO INC.Comparative Balance SheetsDecember 31 Assets 2022 2021 Cash $81,100 $49,000 Accounts receivable 87,700 38,100 Inventory 111,200 102,100 Prepaid expenses 29,000 27,500 Long-term investments 140,900 113,300 Plant assets 285,000 242,400 Accumulated depreciation (46,800) (48,400) Total $688,100 $524,000 Liabilities and Stockholders’ Equity Accounts payable $110,000 $67,400 Accrued expenses payable 16,500 21,500 Bonds payable 119,300 149,300 Common stock 219,900 174,600 Retained earnings 222,400 111,200 Total $688,100 $524,000 CORONADO INC.Income StatementFor the Year Ended December 31, 2022 Sales revenue $376,500 Less:…arrow_forwardCondensed financial data of Coronado Inc. follow. CORONADO INC.Comparative Balance SheetsDecember 31 Assets 2022 2021 Cash $81,100 $49,000 Accounts receivable 87,700 38,100 Inventory 111,200 102,100 Prepaid expenses 29,000 27,500 Long-term investments 140,900 113,300 Plant assets 285,000 242,400 Accumulated depreciation (46,800) (48,400) Total $688,100 $524,000 Liabilities and Stockholders’ Equity Accounts payable $110,000 $67,400 Accrued expenses payable 16,500 21,500 Bonds payable 119,300 149,300 Common stock 219,900 174,600 Retained earnings 222,400 111,200 Total $688,100 $524,000 CORONADO INC.Income StatementFor the Year Ended December 31, 2022 Sales revenue $376,500 Less:…arrow_forwardUse the information provided for Harding Company to answer the question that follow. Harding Company Accounts payable $26,136 Accounts receivable 71,999 Accrued liabilities 6,575 Cash 16,008 Intangible assets 40,514 Inventory 77,552 Long-term investments 102,623 Long-term liabilities 70,943 Notes payable (short-term) 25,456 Property, plant, and equipment 674,580 Prepaid expenses 2,265 Temporary investments 32,175 Based on the data for Harding Company, what is the amount of quick assets? a.$120,182 b.$48,183 c.$800,315 d.$1,618,032arrow_forward
- Question Selected financial data regarding current assets and current liabilities for Ferris Air and Oceanic Airlines are provided as follows: ($ in millions) Ferris Air Oceanic Airlines Current assets: Cash and cash equivalents $1,255 $4,984 Current investments 3,134 1,381 Net receivables 841 1,874 Inventory 555 418 Other current assets 300 667 Total current assets 6,085 9,324 Current liabilities: Current debt 6,661 7,149 Accounts payable 2,702 2,437 Other current liabilities 0 1,634 Total current liabilities 9,363 11,220 Required: 1-a. Calculate the current ratio for Ferris Air and Oceanic Airlines. (Enter your answers in millions. For example, $5,500,000 should be entered as 5.5.) Current Ratio Ferris Air Oceanic air Total current assets $6,085 = 0.650 $9,324 = 0.831 Total current liabilities $9,363 11220 2-a. Calculate the acid-test (quick) ratio for Ferris Air and Oceanic Airlines. (Enter…arrow_forwardA.2 Starkey Company's sales, current assets, and current liabilities (all in thousands of dollars) have reported as follow over the last five years (Year 5 is the most recent year): Sales Current assets: Cash Accounts receivable Inventory Total current assets Current liabilities Required: Year 5 $5,625 $ Year 4 $5,400 64 $ 560 896 Year 3 Year 2 $4,950 $4,725 72 $ 84 496 880 $ 88 416 864 Year 1 $ 4,500 80 432 400 816 800 $ 1,332 $1,368 $ 1,280 300 $1,520 $1,448 $ 390 $ 318 $ 324 $ 330 $ 1. Express all of the asset, liability, and sales data in trend percentages. (Show percentages for each item.) Use Year 1 as the base year, and carry computations to one decimal place. 2. Comment the results of your analysis.arrow_forwardCullumber Company has these comparative balance sheet data: CULLUMBER COMPANYBalance SheetsDecember 31 2022 2021 Cash $ 16,350 $ 32,700 Accounts receivable (net) 76,300 65,400 Inventory 65,400 54,500 Plant assets (net) 218,000 196,200 $376,050 $348,800 Accounts payable $ 54,500 $ 65,400 Mortgage payable (15%) 109,000 109,000 Common stock, $10 par 152,600 130,800 Retained earnings 59,950 43,600 $376,050 $348,800 Additional information for 2022: 1. Net income was $34,000. 2. Sales on account were $383,300. Sales returns and allowances amounted to $26,600. 3. Cost of goods sold was $200,600. 4. Net cash provided by operating activities was $59,000. 5. Capital expenditures were $26,400, and cash dividends were $16,500. (d) Inventory turnover. enter inventory turnover in times rounded to 2 decimal places times (e)…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License