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 $ 32,995 97,276 122, 306 10,596 294,626 $ 557,709 $ 38,847 $ 40,867 65,964 52,886 88,056 58,617 10,197 4, 363 277,720 247,967 $ 480,784 $ 494,700 $ 136,092 $ 81,252 $ 53,420 103,801 162,500 155,316 $ 557,709 110,580 87,650 162,500 162,500 126,452 101,130 $ 480,784 $ 404,709 (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. Current Ratio 1 Choose Denominator: Choose Numerator: Current Ratio Current ratio Current Yr: / to 1 to 1 = 1 Yr Ago: 2 Yrs Ago: to 1 Reim Required 1B >

Answer 1

1a]	Current Ratio
		Numerator	/	Denominator	=	Current Ratio
		Current Assets		Current liabilities		Current Ratio
	Current Yr	$                   263,083		$                  136,092		1.93	to 1
	1 Yr Ago	$                   203,064		$                    81,252		2.50	to 1
	2 Yrs Ago	$                   156,733		$                    53,420		2.93	to 1
	Current assets = Cash+AR+Merchandise inventory+Prepaid expenses
1-b]	The current ratio has worsened over the 3 Yr period
	Acid Test Ratio
		Numerator	/	Denominator	=	Current Ratio
		Quick Assets		Current liabilities		Current Ratio
	Current Yr	$ 130,181		$                  136,092		0.96	to 1
	1 Yr Ago	$ 104,811		$                    81,252		1.29	to 1
	2 Yrs Ago	$ 93,753		$                    53,420		1.76	to 1
	Quick assets = Cash+AR
2-b]	The acid test ratio has worsened over the 3 Yr period