Question

Question Help The comparative financial statements of Norfolk Cosmetic Supply for 2018, 2017 and 2016 include the data shown here (Click the icon to view the comparative financial data.) Read the requirements Requirement 1a. Compute the acid-test ratio for 2018 and 2017. (Round to two decimals.) (Abbreviations used: Cash short-term investments. Round the acid test ratios to two decimals, XXX) Cash including cash equivalents: ST invest. = Acid-test ratio 2018 2017

Answer 1

Answer is given below

Could see format only for a)

for b) and c) have done in my format.If you have different format do let me know . Answer remains the same

For Accounts Receivable average balance has been taken in calculation. Also 365 days is taken

1 a) Acid-test ratio Year Quick Assets Acid test ratio Current Liabilities $560,000 $630,000 2018 2017 490,000 470,000 0.88 0.75 IN Quick Current assets excludes Inventory and prepaid expense b) Accounts Receivable Ratio Year Sales Average Accounts Receivable 260,000 250,000 Accounts Receivable turnover 22.65 20.52 2018 2017 5,890,000 5,130,000 c) Days' sales in receivables Year 365 days Days Sales in Receivables Accounts Receivable turnover 22.65 20.52 2018 2017 365 365 = 16 18 Days Days 2 Acid-test ratio Improved Accounts Receivable Ratio Improved Days' sales in receivables Improved All the ratios have improved and trend is favourable for the company

working notes: Average Accounts receivable 2018 2017 2016 AR balance $280,000 $240,000 $260,000 Average for 2018 $260,000 Average for 2017 $250,000