Question

ESSAY. Write your answer in the space provided or on a separate sheet of paper. Use this information to answer the following questions: The condensed balance sheet and income statement for Marjoram Company are presented below Marjoram Company Balance Sheet At December 31, 2018 Cash Nontrade receivable due August 15, 2019 Accounts receivable (net) Merchandise inventory Property, plant, and equipment (net) Intangible assets Total Assets $ 19,000 35,000 48,400 70,600 250,000 12.400 $435.400 Current liabilities 11% Bonds payable, long term Paid in capital Retained earnings Total liabilities and equity $108,400 100,000 70,000 157.000 $435.400 Marjoram Company Income Statement For the Year ended December 31, 2018 Sales Cost of goods sold Gross profit Operating expenses Operating income Interest expense Income before income taxes Income taxes Net income $704,000 422.400 $281,600 166.200 $115,400 11.000 $104,400 31.320 $73.080 1) Compute the current ratio for Marjoram Company. Round your answer to two decimal places. 2) Compute the acid-test ratio for Marjoram Company. Round your answer to two decimal places. ( a

Answer 1

Answer-1)- The current ratio for Marjoram Company is =1.60 times.

Explanation- Current Ratio=Current Assets/ Current Liabilities

     = $173000/$108000

     = 1.60 times

Where- Current assets = Cash+ Non-trade receivable +Accounts receivable (net)+ Merchandise inventory

= $19000+$35000+$48400+$70600

= $173000

2)- The acid-test ratio for Marjoram Company is =0.95 times

Explanation- Acid-test (Quick ratio):- Current assets-Inventory-Prepaid expenses/Current Liabilities

      =($173000-$70600)/$108000

     = $102400/$108000

    = 0.95 times