Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Equipment Accumulated Depreciation Accounts Payable Notes Payable (6%, due April 1, Year 2) Common Stock Retained Earnings Debit $ 25,600 47,200 Credit $ 4,700 20,500 51,000 17,500 2,000 29,000 55,000 40,000 31,100 Totals $161,800 $161,800 During January Year 1, the following transactions occur: January 2 Sold gift cards totaling $9,000. The cards are redeemable for merchandise within one year of the purchase date. January 6 Purchase additional inventory on account, $152,000. January 15 The comapany sales for the first half of the month total $140,000. All of these sales are on account. The cost of the units sold is $76,300. January 23 Receive $125,900 from customers on accounts receivable. January 25 Pay $95,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $5,300. January 30 The comapany sales for the second half of the month total $148,000. Sales include $10,000 for cash and $138,000 on account. The cost of the units sold is $82,000. January 31 Pay cash for monthly salaries, $52,500.
Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Equipment Accumulated Depreciation Accounts Payable Notes Payable (6%, due April 1, Year 2) Common Stock Retained Earnings Debit $ 25,600 47,200 Credit $ 4,700 20,500 51,000 17,500 2,000 29,000 55,000 40,000 31,100 Totals $161,800 $161,800 During January Year 1, the following transactions occur: January 2 Sold gift cards totaling $9,000. The cards are redeemable for merchandise within one year of the purchase date. January 6 Purchase additional inventory on account, $152,000. January 15 The comapany sales for the first half of the month total $140,000. All of these sales are on account. The cost of the units sold is $76,300. January 23 Receive $125,900 from customers on accounts receivable. January 25 Pay $95,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $5,300. January 30 The comapany sales for the second half of the month total $148,000. Sales include $10,000 for cash and $138,000 on account. The cost of the units sold is $82,000. January 31 Pay cash for monthly salaries, $52,500.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:**b-1. Calculate the acid-test ratio at the end of January.**
**Answer is complete but not entirely correct.**
The blue table under "Acid-test Ratio" illustrates the calculation:
- **Choose Numerator:** Quick Assets
- Value: $207,680
- This value is selected correctly.
- **Choose Denominator:** Current Liabilities
- Value: $106,575
- This value is selected correctly.
- **Acid-test Ratio Calculation:**
- Quick Assets / Current Liabilities = Acid-test Ratio
- $207,680 / $106,575 = 1.95
**Explanation:**
The acid-test ratio, also known as the quick ratio, measures a company's ability to cover its current liabilities without relying on the sale of inventory. In the example, the calculated acid-test ratio is 1.95, indicating that for every dollar of current liabilities, there are $1.95 of quick assets available. Despite being calculated correctly, the answer is marked incomplete due to a potentially missing context or assumption.
Transcribed Image Text:**General Ledger and Transactions Overview**
**General Ledger Balances as of January 1, Year 1:**
| Accounts | Debit | Credit |
|----------------------------------------|----------|----------|
| Cash | $25,600 | |
| Accounts Receivable | 47,200 | |
| Allowance for Uncollectible Accounts | | $4,700 |
| Inventory | 20,500 | |
| Land | 51,000 | |
| Equipment | 17,500 | |
| Accumulated Depreciation | | 2,000 |
| Accounts Payable | | 29,000 |
| Notes Payable (6%, due April 1, Year 2)| | 55,000 |
| Common Stock | | 40,000 |
| Retained Earnings | | 31,100 |
| **Totals** | **$161,800** | **$161,800** |
**Transactions During January, Year 1:**
- **January 2:** Sold gift cards totaling $9,000. The cards are redeemable for merchandise within one year of the purchase date.
- **January 6:** Purchased additional inventory on account, $152,000.
- **January 15:** Company sales for the first half of the month total $140,000. All sales are on account. The cost of units sold is $76,300.
- **January 23:** Received $125,000 from customers on accounts receivable.
- **January 25:** Paid $95,000 to inventory suppliers on accounts payable.
- **January 28:** Wrote off accounts receivable as uncollectible, $5,300.
- **January 30:** Company sales for the second half of the month total $148,000, including $10,000 for cash sales and $138,000 on account. The cost of units sold is $82,000.
- **January 31:** Paid cash for monthly salaries, $52,500.
This summary provides insight into the financial position and transactions of the company during the specified period.
Expert Solution
Step 1
Calculation of Quick Assets:
| Quick Assets | Amount ($) |
| Cash and Cash Equivalents | 14,000 |
| Accounts Receivable | 194,000 |
| Total Quick Assets | 208,000 |
Cash and Cash Equivalents
| Particulars | Amount ($) |
| Opening Balance | 25,600 |
| Receive on Accounts Receivable | 125,900 |
| Payment on Accounts Payable | (95,000) |
| Cash Sales on Jan 30 | 10,000 |
| Monthly Salaries payment on Jan 31 | (52,500) |
| Closing Balance | 14,000 |
Accounts Receivable
| Particulars | Amount ($) |
| Opening Balance | 47,200 |
| Account Sales on Jan 15 | 140,000 |
| Receive on Account on Jan 23 | (125,900) |
| Write off | (5,300) |
| Account Sales on Jan 30 | 138,000 |
| Closing Balance | 194,000 |
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