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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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):
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
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E3-39B. (Learning Objective 6: Analyze and evaluate liquidity and debt-paying ability) BurnesConsulting Company reported these ratios at December 31, 2018 (dollar amounts in millions):Current ratio = $20 = 2.00 $10 $60 Debt ratio = = 0.50 $30Burnes Consulting completed these transactions during 2019:a. Purchased equipment on account, $4b. Paid long-term debt, $7c. Collected cash from customers in advance, $5d. Accrued interest expense, $6e. Made cash sales, $8Determine whether each transaction improved or hurt the company’s current ratio and debt ratio.
(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…
S3-2. (Learning Objective 1: Explain how accrual accounting differs from cash-basisaccounting) Portage Corporation began 2018 owing notes payable of $4.0 million. During2018, Portage borrowed $1.9 million on notes payable and paid off $1.7 million of notespayable from prior years. Interest expense for the year was $1.1 million, including $0.2 millionof interest payable accrued at December 31, 2018.Show what Portage should report for these facts on the following financial statements:1. Income statement for 2018a. Interest expense2. Balance sheet as of December 31, 2018a. Notes payableb. Interest payable
Chapter 3 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
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