Question

Simon Company's year-end balance sheets follow. Current Yr 1 Yr Ago 2 Yrs Ago At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Accounts payable Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity $ 31,596 92,499 119,789 10,483 286,564 $ 540,931 $ 37,679 $ 38,856 65,938 50,269 87,132 56,285 9,597 4, 189 265,974 239,001 $ 466,320 $ 388,600 $ 134,692 $ 78,020 $ 49,756 101,695 162,500 142,044 $ 540,931 109,399 86,739 162,500 162,500 116,401 89,605 $ 466,320 $ 388,600 (1-a) Compute the current ratio for each of the three years. (1-b) Did the current ratio improve or worsen over the three year period? (2-a) Compute the acid-test ratio for each of the three years. (2-b) Did the acid-test ratio improve or worsen over the three year period? Complete this question by entering your answers in the tabs below.

Answer 1

Solution

	Current ratio
	Numerator	/	denominator	=	Current ratio
	Current Assets	/	Current Liabilities	=	Current ratio
Current year	$     254,367	/	$ 134,692	=	1.89	to 1
1 yr ago	$     200,346	/	$    78,020	=	2.57	to 1
2 yr ago	$     149,599	/	$    49,756	=	3.01	to 1

Current ratio Improved

	Acid test ratio
	Numerator	/	denominator	=	Acid test ratio
	Quick Assets	/	Current Liabilities	=	Acid test ratio
Current year	$     124,095	/	$ 134,692	=	0.92	to 1
1 yr ago	$     103,617	/	$    78,020	=	1.33	to 1
2 yr ago	$        89,125	/	$    49,756	=	1.79	to 1

Acid test ratio Improved

Working

	Current year	1 yr ago	2 yr ago
Cash	$            31,596	$          37,679	$          38,856
Accounts receivable	$            92,499	$          65,938	$          50,269
Merchandise inventory	$          119,789	$          87,132	$          56,285
Prepaid expense	$            10,483	$            9,597	$            4,189
Total current assets	$          254,367	$        200,346	$        149,599
Less: Prepaid expense	$          (10,483)	$          (9,597)	$          (4,189)
Less: Merchandise inventory	$       (119,789)	$        (87,132)	$        (56,285)
Quick assets	$          124,095	$        103,617	$          89,125

Answer 2

how did you get average inventory?