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4-5 The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company. NELSON COMPANY...

4-5 The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company.

NELSON COMPANY
Unadjusted Trial Balance
January 31, 2017
Debit Credit
Cash $ 31,200
Merchandise inventory 14,500
Store supplies 5,200
Prepaid insurance 2,800
Store equipment 42,600
Accumulated depreciation—Store equipment $ 16,000
Accounts payable 13,000
Common stock 3,800
Retained earnings 19,000
Dividends 2,100
Sales 141,750
Sales discounts 1,900
Sales returns and allowances 2,050
Cost of goods sold 38,000
Depreciation expense—Store equipment 0
Salaries expense 27,800
Insurance expense 0
Rent expense 16,000
Store supplies expense 0
Advertising expense 9,400
Totals $ 193,550 $ 193,550

Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Nelson Company uses a perpetual inventory system.

Additional Information:

  1. Store supplies still available at fiscal year-end amount to $2,700.
  2. Expired insurance, an administrative expense, for the fiscal year is $1,500.
  3. Depreciation expense on store equipment, a selling expense, is $1,600 for the fiscal year.
  4. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,900 of inventory is still available at fiscal year-end.

4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2017. (Round your answers to 2 decimal places.)

Current ratio :1
Acid-test ratio :1
Gross margin ratio :1
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Answer #1

Answer:-

Working:

Cash 31,200
Merchandise Inventory 10,900(14500-3600)
Store Supplies 2,700(5,200-2,500)
Prepaid Insurance 41,100(42600-1500)
Total Current Assets 85,900
Less: Merchandise Inventory -10,900
Quick Assets 75,000
Accounts payable 15,000
Current liabilities 15,000
(No other Current liabilities are found)
Ratios:
Answer Formulas
Current ratio 5.72(85,000/15,000) Total current Assets / Current liabilities
Acid-test ratio 5(75,000/15,000) Quick Assets / Quick Assets
Acid-test ratio 67.86%(96200/141750)*100 (Gross profit / Net sales) *100
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