Chapter 8, Problem 8.1FSC

Requirement (1)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Acid test ratio

The financial ratio which evaluates the ability of a company to pay all of its current liabilities, if they came due immediately is referred to as acid-test ratio.

To identify: The amount of accounts receivable which was reported in Corporation T’s financial reports as of January 30, 2016 and January 31, 2015.

Requirement (2)

To determine

To explain:  The way in which Corporation T manages its account for credit card sales.

Requirement (3)

To determine

To explain: The advantages enjoyed by Corporation T in handling T brand credit card transaction.

Requirement (4)

To determine

To compute: Corporation T’s acid test ratio as of January 30, 2016 and January 31, 2015.