Explanation 1. C u r r e n t R a t i o = C u r r e n t A s s e t C u r r e n t L i a b i l i t i e s = $ 289 , 000 $ 187 , 000 = 1.55 * C u r r e n t A s s e t s = C a s h + A c c o u n t s R e c e i v a b l e + M e r c h a n d i s e I n v e n t o r y = $ 23 , 000 + $ 81 , 000 + $ 185 , 000 = $ 289 , 000 * C u r r e n t L i a b i l i t i e s = A c c o u n t s P a y a b l e + A c c r u e d L i a b i l i t i e s + S h o r t − t e r m N o t e s P a y a b l e = $ 99 , 000 + $ 37 , 000 + $ 51 , 000 = $ 187 , 000 D e b t R a t i o = T o t a l L i a b i l i t i e s T o t a l A s s e t s = $ 411 , 000 $ 635 , 000 = 0.65 * T o t a l L i a b i l i t i e s = C u r r e n t L i a b i l i t i e s + L o n g − T e r m L i a b i l i t i e s = $ 187 , 000 + $ 224 , 000 = $ 411 , 000 * T o t a l A s s e t s = $ 635 , 000 E a r n i n g s p e r S h a r e = N e t I n c o m e C o m m o n S h a r e O u t s t a n d i n g = $ 68 , 000 20 , 000 s h a r e s = $ 3.40 p e r S h a r e 2. a. Purchase of merchandise inventory of $49,000 on account. Current Ratio C u r r e n t R a t i o = $ 338 , 000 $ 236 , 000 = 1...

Horngren's Accounting: The Managerial Chapters (12th Edition) (loose Leaf Version)

12th Edition

ISBN: 9780134486826

Author: MILLER-NOBLES, Tracie L.; Mattison, Brenda L.; Matsumura, Ella Mae

Publisher: PEARSON

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Question

Chapter 17, Problem P17.26APGA

To determine

Current Ratio:

The liquidity ratio which measures a company’s ability to pay its short-term liabilities by using the short-term assets of the company is called current ratio. It is computed by dividing the current assets by the current liabilities of the company.

Debt Ratio:

Debt ratio is metric which measures the proportion of borrowed funds in financing the assets of the company. Debt ratio is evaluated by dividing the overall debt of a company by the total asset of the company.

Earnings per Share:

Earnings per share is profitability ratio which measures how much profit is earned for each outstanding share of a company. It is computed by dividing the net income available for common stockholders by the number of outstanding common stock.

To determine:

1. Compute current ratio, debt ratio, and earnings per share of Style Traveler.

2. Compute the three ratios after evaluating the effect of each transaction provided.

Expert Solution & Answer

Chapter 17 Solutions

Horngren's Accounting: The Managerial Chapters (12th Edition) (loose Leaf Version)

Ch. 17 - Prob. 1QC Ch. 17 - Prob. 2QC Ch. 17 - Prob. 3QC Ch. 17 - Prob. 4QC Ch. 17 - Prob. 5QC Ch. 17 - Prob. 6QC Ch. 17 - Prob. 7QC Ch. 17 - Prob. 8QC Ch. 17 - Prob. 9QC Ch. 17 - Prob. 10QC

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