Question

Adams Co. reports the following balance sheet accounts as of December 31 .

Required:

Prepare a classified balance sheet. (Amounts to be deducted should be indicated by a minus sign.)

a. Compute the acid-test ratio for each of the following separate cases.

b. Which company is in the best position to meet short-term obligations?

Answer 1

Balance Sheet
Assets
Current Assets
Cash	$ 16,000
Accounts Receivable	$ 4,000
Merchandise Inventory	$                 14,000
Office Supplies	$ 2,000
Prepaid Rent	$                   7,000
Prepaid Insurance	$ 3,000
Total Current Assets		$               46,000
Property, Plant, and Equipment
Land		$ 22,000
Building	$                 55,000
Accumulated Depreciation (Buildings)	$                 (5,000)	$               50,000
Total Assets		$             118,000
Liabilities
Current Liabilities
Accounts Payables	$                 10,000
Salaries Payable	$                   6,000
Total Current Liabilities		$               16,000
Long term Liabilities
Notes Payable		$ 30,000
Mortgage Payable		$ 12,000
Total Long term Liabilities		$ 42,000
Total Liabilities		$ 58,000
Stockholder's Equity
Common Stock	$                 10,000
Retained Earnings	$                 50,000
Total Stockholder's Equity		$ 60,000
Total Liabilities & Stockholder's Equity		$             118,000

a)	Camaro	GTO	Torino
Quick assets	2,400	580	2,280
Current liabilities	2,000	1,000	3,800
Acid test ratio	1.2	.58	.6
b) Camaro