Problem

Measures of LiquiditySome of the accounts appearing in the year-end financial statements o...

Measures of Liquidity

Some of the accounts appearing in the year-end financial statements of Rogand Grocery, Inc., appear below. This list includes all of the company’s current assets and current liabilities.

Sales

$1,880,000

Accumulated depreciation: equipment

370,000

Notes payable (due in 90 days)

70,000

Retained earnings

241,320

Cash

69,400

Capital stock

150,000

Marketable securities

175,040

Accounts payable

128,100

Mortgage payable (due in 15 years)

320,000

Salaries payable

7,570

Dividends

25,000

Income taxes payable

14,600

Accounts receivable

230,540

Inventory

179,600

Unearned revenue

10,000

Unexpired insurance

4,500

Instructions

a. Prepare a schedule of the company’s current assets and current liabilities. Select the appropriate items from the preceding list.


b. Compute the current ratio and the amount of working capital. Explain how each of these measurements is computed. State, with reasons, whether you consider the company to be in a strong or weak current position.

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