Financial Accounting Plus MyLab Accounting with Pearson eText -- Access Card Package (12th Edition)

12th Edition

ISBN: 9780134833132

Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

Publisher: PEARSON

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Textbook Question

Chapter 3, Problem 3.39BE

LO 6

(Learning Objective 6: Analyze and evaluate liquidity and debt-paying ability) Burnes Consulting Company reported these ratios at December 31, 2018 (dollar amounts In millions):

C u r r e n t r a t i o = $ 20 $ 10 = 2.00 Debt ratio = $ 30 $ 60 = 0.50

Burnes Consulting completed these transactions during 2019:

a. Purchased equipment on account, $4
b. Paid long-term debt, $7
c. Collected cash from customers in advance, $5
d. Accrued Interest expense $6
e. Wade cash sales $8

Determine whether each transaction improved or hurt the company's current ratio and debt ratio.

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Chapter 3, Problem 3.38BE

Chapter 3, Problem 3.40SE

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Chapter 3 Solutions

Financial Accounting Plus MyLab Accounting with Pearson eText -- Access Card Package (12th Edition)

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Solution Summary: The author explains current ratio and debt ratio. Current ratio reflects the ability to oblige the short term debts of a company.

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