Required information Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] Simon Company's year-end balance sheets follow. At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Current Year $ 32,893 100, 248 123,571 10,593 307,446 $ 574,751 1 Year Ago $ 39,242 68,673 92,580 $ 144,544 105,892 162,500 161,815 $ 574,751 10,613 284,367 $ 495,475 Liabilities and Equity Accounts payable Long-term notes payable Common stock, $10 par value Retained earnings Total liabilities and equity For both the current year and one year ago, compute the following ratios: $ 86,247 115,099 162,500 131,629 $ 495,475 2 Years Ago Exercise 13-7 (Algo) Analyzing liquidity LO P3 (1-a) Compute the current ratio for each of the three years. (1-b) Did the current ratio improve or worsen over the three-year period? (2-a) Compute the acid-test ratio for each of the three years. (2-b) Did the acid-test ratio improve or worsen over the three-year period? $ 39,674 52,365 58,631 4,497 249,633 $ 404,800 $ 52,365 90,355 163,500 98,580 $ 404,800
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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Required information
Use the following information for the Exercises below. (Algo)
[The following information applies to the questions displayed below.]
Simon Company's year-end balance sheets follow.
At December 31
Assets
Cash
Accounts receivable, net
Merchandise inventory
Prepaid expenses
Plant assets, net
Total assets
Liabilities and Equity
Accounts payable
Long-term notes payable
Common stock, $10 par value
Retained earnings
Total liabilities and equity
Current Year
$32,893
100, 248
123,571
10,593
307,446
$ 574,751
$ 144,544
105,892
162,500
161,815
$ 574,751
Exercise 13-7 (Algo) Analyzing liquidity LO P3
Required 1A
For both the current year and one year ago, compute the following ratios:
1 Year Ago
Compute the current ratio for each of the three years.
$ 39,242
68,673
92,580
10,613
284,367
$ 495,475
(1-a) Compute the current ratio for each of the three years.
(1-b) Did the current ratio improve or worsen over the three-year period?
(2-a) Compute the acid-test ratio for each of the three years.
(2-b) Did the acid-test ratio improve or worsen over the three-year period?
Required 1B Required 2A Required 2B
$ 86, 247
115,099
162,500
131,629
$ 495,475
Complete this question by entering your answers in the tabs below.
2 Years Ago
$ 39,674
52,365
58,631
4,497
249,633
$ 404,800
$ 52,365
90,355
163,500
98,580
$ 404,800
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