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Saved Exercise 13-7 Analyzing liquidity LO P3 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 $ 29,947 87,692 112,506 9,843 283,295 $ 523,283 $ 35,728 $ 37,953 64,418 48,148 81,786 52,324 9,663 4,176 259,511 229,599 $ 451,106 $ 372,200 $ 134,206 $ 76,999 $ 48,148 98,377 162,500 120,200 $ 523,283 105,829 82,256 162,500 162,500 105,778 79,296 $ 451, 106 $ 372,200 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? 12-a) Compute the acid-test ratio for each of the three years. 12-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. Required 1A Required 1B Required 2A Required 2B Compute the current ratio for each of the three years, Current Ratio < Prev 6 of 8 !!! Next >

Answer 1

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Answers are highlighted in yellow: Naming convention in drop down is not availaable, can be slightly different: Solution: 1)a Numerator Current Asset Current year 239988 1 Yr ogo: 191595 2 Yr ogo: 142601 Current Ratio 1 Denominator / Current Liabilities / 134206 7 76999 / 48148 = Current Ratio Current Ratio 1.79 to 1 2.49 to 1 2.96 to 1 = (523283-283295) (451106-259511) (372200-229599) = 1)b Worsen because, in current year Current ratio is lowest in 3 years. 2) Current Ratio Numerator Short-term Invest 0 + + Cash 29947 Accounts receivables 87692 Denominator Current Liabilities 134206 + + / 7 / / 7 Current year 1 Yr ogo: 2 Yr ogo: Acid Test Ratio Acid Test Ratio 0.65 to 1 0.84 to 1 1.00 to 1 + 0 + = 35728 37953 64418 48148 76999 48148 + 이 + = 2) Worsen because, in current year quick ratio is lowest in 3 years.