Mixon Company's year-end balance sheets show the following: Cash Accounts receivable, net Merchandise inventory .. Prepaid expenses Plant assets, net Total assets... Accounts payable.... Long-term notes payable secured by mortgages on plant assets .... Common stock, $10 par value Retained earnings Total liabilities and equity 2006 $ 30,800 88,500 111,500 9,700 277,500 $518,000 $128,900 97,500 162,500 129,100 $518,000 2005 $ 35,625 62,500 82,500 9,375 255,000 $445,000 $ 75,250 2004 $36,800 49,200 53,000 4,000 229,500 $372,500 $ 49,250 102,500 82,500 162,500 162,500 104,750 78,250 $445,000 $372,500 Required: Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the: (a) current ratio and (b) acid-test ratio. Comment on the ratio results. EXE Eva Liq
Mixon Company’s year-end
EXERCISE 1–3
Evaluating Short-Term Liquidity
2006
Cash ............................ $ 30,800 Accountsreceivable,net ............. 88,500 Merchandiseinventory ............... 111,500 Prepaidexpenses ................... 9,700 Plantassets,net ................... 277,500
Totalassets ....................... $518,000
Accountspayable ................... $128,900 Long-term notes payable secured
by mortgages on plant assets . . . . . . . 97,500 Commonstock,$10parvalue ......... 162,500 Retainedearnings .................. 129,100
Totalliabilitiesandequity ............ $518,000
2005
$ 35,625 62,500 82,500 9,375 255,000
$445,000
2004
$ 36,800 49,200 53,000 4,000 229,500
$372,500 $ 49,250
82,500 162,500 78,250
$372,500
$445,000
$ 75,250
102,500 162,500 104,750
49
Required:
Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the: (a)
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