Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Textbook Question
Chapter 5, Problem 5.12S
LO 7
(Learning Objective 7: Evaluate liquidity using the quick [acid-test] ratio and days’ sales in receivables) Northern Products reported the following amounts in its 2019 financial statements. The 2018 amounts are given for comparison.
![Chapter 5, Problem 5.12S, LO 7 (Learning Objective 7: Evaluate liquidity using the quick [acid-test] ratio and days sales in](http://dev-ingestion-image-output.s3-website-us-east-1.amazonaws.com/9780134725987/Chapter-5/images/25987-5-5.12s-question-digital_image001.jpg)
Requirements
1. Compute Northern’s quick (acid-test) ratio at the end of 2019. Round to two decimal places. How does the quick ratio compare with the industry average of 0.92?
2. Compare days’ sales outstanding for 2019 with the company’s credit terms or net 30 days.
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A Company’s net accounts receivable were P250,000 as of December 31, 2018, and P300,000 as of December 31, 2019. Net cash sales for 2019 were P100,000. The accounts receivable turnover for 2019 was 5.0. What were the Company’s total net sales for 2019? *a. P1,175,000.00b. P1,275,000.00c. P1,375,000.00d. P1,475,000.00e. P1,575,000.00
(Learning Objective 7: Evaluate liquidity using the quick [acid-test] ratio and days’sales in receivables) Northern Products reported the following amounts in its 2019 financialstatements. The 2018 amounts are given for comparison.2019 2018Current assets:Cash............................................ $ 9,500Short-term investments................ 7,000Accounts receivable..................... $70,100Less: Allowance foruncollectibles.......................$86,500(7,500) (5,500) 64,600Inventory..................................... 190,000Prepaid insurance ........................ 2,200Total current assets..................... 273,300Total current liabilities.................... 106,000Net sales (all on account) ................$ 9,50010,50079,000189,0002,200290,20099,0001,077,000 734,000Requirements1. Compute Northern’s quick (acid-test) ratio at the end of 2019. Round to two decimalplaces. How does the quick ratio compare with the industry average of 0.92?2. Compare days’ sales…
5.Blige Corporation had sales revenue of $12,000,000 in 2019 and$15,000,000 in 2020. Accounts receivable were $1,800,000 at the end of2019 and $2,000,000 at the end of 2020.Required(a)Calculate the accounts receivable turnover ratio for 2019 and 2020.(b)Has the management of accounts receivable improved or worsenedfrom 2019 to 2020?(c)What are the advantages and disadvantages of selling goods oncredit?(d)How much cash did Blige Corporation collect from its customers in2020?(e)If sales in 2021 were expected to be $22,500,000, what would youexpect accounts receivable to be at the end of 2021?Does a major increase in accounts receivable create
Chapter 5 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
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