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
FINANCIAL RATIO:
Requirement: Compute for the following financial ratios for the year 2021 (round-off answers to two decimal places)
a. Current ratio
b. Quick (Acid-test) ratio
c. Working capital
d. Inventory turnover
e. Days of inventory (use 365 days)
f. Accounts receivable turnover (assume all sales are on credit)
g. Days of receivable (use 365 days)
h. Debt ratio
i. Equity ratio
j. Debt-to-equity ratio
k. Gross profit ratio
1. Net profit ratio
m. Return on assets
n. Return on equity
2. Using the following select financial statement information from Black Water Industries, compute the accounts
receivable turnover ratios for 2018 and 2019 (round answers to two decimal places). What do the outcomes tell a
potential investor about Black Water Industries?
Year
2017
2018
2019
BLACK WATER INDUSTRIES
Net Credit Sales
$685,430
700,290
768,500
Ending Accounts Receivable
$330,250
360,450
401,650
Chapter 5 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
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