Question

Simon Company’s year-end balance sheets follow.

At December 31	2017			2016			2015
Assets
Cash	$	27,923		$	33,985		$	32,679
Accounts receivable, net		85,935			58,886			45,369
Merchandise inventory		105,949			76,257			47,839
Prepaid expenses		9,270			8,833			3,743
Plant assets, net		258,832			242,650			210,670
Total assets	$	487,909		$	420,611		$	340,300
Liabilities and Equity
Accounts payable	$	119,060		$	71,083		$	46,267
Long-term notes payable secured by mortgages on plant assets		92,644			93,838			75,206
Common stock, $10 par value		162,500			162,500			162,500
Retained earnings		113,705			93,190			56,327
Total liabilities and equity	$	487,909		$	420,611		$	340,300

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

1	Current Ratio	=	Current Assets / Current Liabilities
		2017	2016	2015
	Cash	$     27,923	$     33,985	$     32,679
	Accounts receivables, net	$     85,935	$     58,886	$     45,369
	Merchandise Inventory	$ 1,05,949	$     76,257	$     47,839
	Prepaid expenses	$       9,270	$       8,833	$       3,743
(a)	Current assets	$ 2,29,077	$ 1,77,961	$ 1,29,630
	Current Liabilities
	Accounts Payable	$ 1,19,060	$     71,083	$     46,267
(b)	Current Liabilities	$ 1,19,060	$     71,083	$     46,267
(a) / (b)	Current Ratio	192%	250%	280%
2	Acid Test Ratio	=	Current Assets (except Inventory) / Current Liabilities
		2017	2016	2015
	Cash	$     27,923	$     33,985	$     32,679
	Accounts receivables, net	$     85,935	$     58,886	$     45,369
	Prepaid expenses	$       9,270	$       8,833	$       3,743
(a)	Current assets	$ 1,23,128	$ 1,01,704	$     81,791
	Current Liabilities
	Accounts Payable	$ 1,19,060	$     71,083	$     46,267
(b)	Current Liabilities	$ 1,19,060	$     71,083	$     46,267
(a) / (b)	Acid Test Ratio	103%	143%	177%