Conservatism ANALYSIS Liquidity is being able to pay current debts Working Capital = CA - CL Current Ratio CA/CL Acid-test Ratio aka Quick Ratio = (Cash + Current investments +A/R)/CL --does not include inventory or prepaid-assets --uses assets that can be easily converted to cash Practice UA, Inc., shows the following balance sheet accounts; IDENTIFY the CURRENT assets & liabilities: Assets Liabilities Cash Accounts receivable Land Short term investments PPE, net Inventory Intangible assets Other current $50,000 Note payable due in six months 30,000 Accounts payable 200,000 Bond Payable 70,000 Payroll taxes payable 1,250,000 Note payable due in 18 months 55,000 Current portion of Long Term Debt 45,000 Deferred revenue $25,000| 20,000 1,000,000 15,000 75,000 10,000| 5,000 50,000 5,000 Long Term Debt Determine total CURRENT Assets: Determine Total CURRENT Liabilities: Calculate working capital: Calculate the current ratio: %24
Conservatism ANALYSIS Liquidity is being able to pay current debts Working Capital = CA - CL Current Ratio CA/CL Acid-test Ratio aka Quick Ratio = (Cash + Current investments +A/R)/CL --does not include inventory or prepaid-assets --uses assets that can be easily converted to cash Practice UA, Inc., shows the following balance sheet accounts; IDENTIFY the CURRENT assets & liabilities: Assets Liabilities Cash Accounts receivable Land Short term investments PPE, net Inventory Intangible assets Other current $50,000 Note payable due in six months 30,000 Accounts payable 200,000 Bond Payable 70,000 Payroll taxes payable 1,250,000 Note payable due in 18 months 55,000 Current portion of Long Term Debt 45,000 Deferred revenue $25,000| 20,000 1,000,000 15,000 75,000 10,000| 5,000 50,000 5,000 Long Term Debt Determine total CURRENT Assets: Determine Total CURRENT Liabilities: Calculate working capital: Calculate the current ratio: %24
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:From page 8-5 of the VLN, what was the
company's current ratio before paying off
the A/P (carry out to one decimal place)?

Transcribed Image Text:GAIN CONTINGENCIES
-not recorded until gain is certain
- Conservatism
-
ANALYSIS
Liquidity is being able to pay current debts
Working Capital = CA - CL
Current Ratio
CA/CL
Acid-test Ratio aka Quick Ratio = (Cash + Current investments
+A/R)/CL
--does not include inventory or prepaid-assets
--uses assets that can be easily converted to cash
Practice
UA, Inc., shows the following balance sheet accounts;
IDENTIFY the CURRENT assets & liabilities:
Assets
Liabilities
$25,000
20,000
1,000,000
15,000
75,000
Cash
$50,000 Note payable due in six months
Accounts receivable
Land
30,000 Accounts payable
200,000 Bond Payable
70,000 Payroll taxes payable
Short term investments
PPE, net
1,250,000 Note payable due in 18 months
Inventory
Intangible assets
55,000 Current portion of Long Term Debt
45,000 Deferred revenue
10,000
5,000
50,000
Other current
5,000 Long Term Debt
Determine total
CURRENT Assets:
Determine Total
CURRENT Liabilities:
Calculate working capital:
Calculate the current ratio:
Calculate the quick ratio:
Assume UA paid off its A/P with cash; re-calculate:
Working capital:
Current ratio:
Quick ratio:
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