Question

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 $ 28,555 84,433 105, 107 9,567 261, 208 $ 488,870 $ 34,390 $ 35,116 60,182 46,822 75,627 50, 868 9,027 3,786 242,214 214,608 $ 421,440 $ 351,200 $ 121,729 $ 72,648 $ 45,895 90,069 162,500 114,572 $ 488,870 98,870 78,391 162,500 162,500 87,422 64,414 $ 421,440 $ 351,200 (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? (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. Required 1A Required 1B Required 2A Required 2B Compute the current ratio for each of the three years.

Answer 1

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Simon Company	Current Year	1 Year Ago	2 Years Ago
Particulars	Amount $	Amount $	Amount $
Current Assets
Cash and cash equivalents	28,555.00	34,390.00	35,116.00
Accounts Receivable, net	84,433.00	60,182.00	46,822.00
Merchandise Inventory	105,107.00	75,627.00	50,868.00
Prepaid expenses	9,567.00	9,027.00	3,786.00
Total Current Assets	227,662.00	179,226.00	136,592.00
Current Liabilities	Current Year	1 Year Ago	2 Years Ago
Accounts Payable	121,729.00	72,648.00	45,895.00
Total Current Liabilities	121,729.00	72,648.00	45,895.00
Answer 1-a
Current Ratio	1.87	2.47	2.98
Total Current Assets/ Total Current Liabilities
Answer 1-b
The Current Ratio has worsened over three year period.
Particulars	Amount $	Amount $	Amount $
Quick Assets
Cash and cash equivalents	28,555.00	34,390.00	35,116.00
Accounts Receivable, net	84,433.00	60,182.00	46,822.00
Total Quick Assets	112,988.00	94,572.00	81,938.00
Current Liabilities	Current Year	1 Year Ago	2 Years Ago
Accounts Payable	121,729.00	72,648.00	45,895.00
Total Current Liabilities	121,729.00	72,648.00	45,895.00
Answer 2-a
Acid Test Ratio	0.93	1.30	1.79
Total Quick Assets/ Total Current Liabilities
Answer 2-b
The Acid Test Ratio has worsened over three year period.