Swifty & Associates Inc. reports the following account balances for the year ending June 30, 2022:...
Swifty & Associates Inc. reports the following account balances for the year ending June 30, 2022:
|
Accounts payable |
$22,000 | ||
|---|---|---|---|
|
Accounts receivable |
37,000 | ||
|
Cash and cash equivalents |
16,300 | ||
|
Goodwill |
120,000 | ||
|
Inventory |
93,000 | ||
|
Notes payable (due 2027) |
120,000 | ||
|
Interest payable |
3,600 | ||
|
Notes payable (due 2023) |
12,000 | ||
|
Property, plant, and equipment |
565,000 | ||
|
Accumulated depreciation |
120,000 | ||
| Prepaid insurance | 10,300 | ||
| Salaries and wages payable | 14,600 | ||
| Bonds payable | 335,000 |
Compute the company’s (a) current ratio and (b) debt to assets
ratio. (Round current ratio to 2 decimal places, e.g.
1.55:1 and debt to assets ratio to 0 decimal place, e.g.
55%.)
| (a) |
Current ratio |
|
:1 | ||
|---|---|---|---|---|---|
| (b) |
Debt to assets ratio |
|
% |
Homework Answers
Current ratio computes the ability of company to service its short term obligation of less than 1 year. It is a liquidity ratio and can measure short term financial strength of company. It is computed by dividing current assets/ current liabilities.
|
Accounts receivable |
$ 37,000 |
|
Cash and cash equivalents |
$ 16,300 |
|
Inventory |
$ 93,000 |
|
Prepaid insurance |
$ 10,300 |
|
Current Assets (A) |
$ 156,600 |
|
Accounts payable |
$ 22,000 |
|
Interest payable |
$ 3,600 |
|
Notes payable due 2023 |
$ 12,000 |
|
salaries and wages payable |
$ 14,600 |
|
Current Liabilities (B) |
$ 52,200 |
|
Current Ratio ( A/B) |
3 : 1 |
Debt to assets ratio measures the leverage of company, specifically financial leverage. It depicts the amount of assets financed by debts. It is computed by dividend total debt by total liabilities.
|
Current Assets |
$ 156,600 |
|
Goodwill |
$ 120,000 |
|
Property, plant and
equipment
565,000 |
$ 445,000 |
|
Total Assets ( C) |
$ 721,600 |
|
Current liabilities |
$ 52,200 |
|
Notes payable due 2027 |
$ 120,000 |
|
bonds payable |
$ 335,000 |
|
Total debt (D) |
$ 507,200 |
|
Debt to assets |
70% |
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Swifty & Associates Inc. reports the following account
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Short-term investments
196,000
Accounts receivable
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Inventory
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Equipment
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Cash
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Short-term investments
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Accounts receivable
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Prepaid expenses
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Land
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Buildings
330,000
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Account Title
Debits
Credits
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Short-term investments
196,000
Accounts receivable
137,000
Long-term investments
42,000
Inventory
222,000
Receivables from employees
47,000
Prepaid expenses (for 2022)
23,000
Land
287,000
Building
1,620,000
Equipment
644,000
Patent (net)
159,000
Franchise (net)
47,000
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627,000
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2018 for Excell Company.
Account Title
Debits
Credits
Cash
$
93,000
Short-term investments
75,000
Accounts receivable
290,000
Prepaid expenses
42,000
Land
85,000
Buildings
330,000
Accumulated depreciation—buildings
$
165,000
Equipment
270,000
Accumulated depreciation—equipment
125,000
Accounts payable
178,000
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240,000
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167,000
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$
1,185,000
$
1,185,000
Additional information:
The short-term investments account includes $23,000 in U.S.
treasury bills purchased...
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