Question

Chapter 13 Homework A Saved 3. Exercise 13-7 Liquidity analysis LO P3 Simon Company's year-end balance sheets follow. 0.29 points At December 31 2015 2017 2016 Assets $ 34,810 $ 4e, 274 $ 41,961 74,840 96,975 11,117 Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net 102,949 126,850 11,668 57,090 62,643 4,805 eBook 325,763 295,794 266,001 $602,040 $519,000 $432,500 Hint Total assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity $146,910 $ 90,342 $ 55,377 Ask 93,671 162,500 162,500 144,401 120,952 $602,040 $519,e00 $432,500 112,052 121,757 162,500 Print 180,578 References 1. Compute the current ratio for the year ended 2017, 2016, and 2015. 2. Compute the acid-test ratio for the year ended 2017, 2016, and 2015.

Answer 1

Requirement 1:

Current Ratio
	Current Assets	/	Current Liabilities	=	Current ratio
2017:	$276,277	/	$146,910	=	1.88	to 1
2016:	$223,206	/	$90,342	=	2.47	to 1
2015:	$166,499	/	$55,377	=	3.01	to 1

Calculations:

	2017	2016	2015
Cash	$34,810	$40,274	$41,961
Accounts receivable, net	$102,949	$74,840	$57,090
Merchandise inventory	$126,850	$96,975	$62,643
Prepaid expenses	$11,668	$11,117	$4,805
Total Current Assets	$276,277	$223,206	$166,499
	2017	2016	2015
Accounts payable	$146,910	$90,342	$55,377
Total Current liabilities	$146,910	$90,342	$55,377

Requirement 2:

Acid-Test Ratio
	Cash	+	Accounts receivable,net	+	Prepaid expenses	/	Accounts payable	=	Acid-Test Ratio
2017:	$34,810	+	$102,949	+	$11,668	/	$146,910	=	1.02	to 1
2016:	$40,274	+	$74,840	+	$11,117	/	$90,342	=	1.40	to 1
2015:	$41,961	+	$57,090	+	$4,805	/	$55,377	=	1.88	to 1