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18) The financial statements for Stephens' Electric Company include the following items:
2019
2018
Cash
$52,000
$51,000
Cash Equivalents
21,500
12,000
Net Accounts Receivable
24,000
35,000
Merchandise Inventory
81,000
70,000
Total Assets
529,000
550,000
Accounts Payable
46,500
42,000
Salaries Payable
21,000
19,000
Long-term Note Payable
63,000
52,000
Income From Operations
125,500
116,000
Interest Expense
30,000
29,000
Compute the 2018 cash ratio. (Round your answer to two decimal places.)
A) 1.03
B) 1.09
C) 1.50
D) 0.56
19) The financial statements for Silver Service Company include the following items:
2019
2018
Cash
$50,500
$42,000
Short-term Investments
26,000
14,500
Net Accounts Receivable
52,000
48,000
Merchandise Inventory
131,000
51,000
Total Assets
532,000
548,000
Accounts Payable
132,500
127,000
Salaries Payable
16,000
16,000
Long-term Note Payable
57,000
57,000
Compute the acid-test ratio for 2018. (Round your answer to two decimal places)
A) 0.87
B) 0.73
C) 0.82
D) 0.63
20) The financial statements of Island Furniture Company include the following items:
2019
2018
Cash
$49,500
$40,000
Short-term Investments
33,000
13,500
Net Accounts Receivable
102,000
104,000
Merchandise Inventory
157,000
145,000
Total Assets
527,000
549,000
Total Current Liabilities
309,000
288,000
Long-term Note Payable
59,000
52,000
What is the 2019 acid-test ratio? (Round your answer to two decimal places.)
A) 0.27
B) 1.11
C) 1.67
D) 0.60
21) Which of the following describes working capital?
A) Current assets minus merchandise inventory
B) Current assets minus current liabilities
C) Total debt minus stockholders' equity
D) Cost of goods sold divided by average merchandise inventory
22) The formula for calculating the cash ratio is ________.
A) (Cash) / Total liabilities
B) (Cash + Cash equivalents) / Total current liabilities
C) (Cash + Cash equivalents) / Total assets
D) (Cash equivalents) / Total current liabilities
23) Extracts from the balance sheet of Detroit, Inc. are as follows:
2019
Assets
Current Assets:
Cash and Cash Equivalents $30,000
Accounts Receivable, Net 65,000
Merchandise Inventory 50,000
Total Current Assets 145,000
Long-term Investments 150,000
Property, Plant, and Equipment, Net 250,000
Total Assets $545,000
Total Current Liabilities $150,000
Compute the acid-test ratio.
24) Use the balance sheet of Michigan, Inc. to calculate working capital for 2019 and 2018.
Michigan, Inc.
Comparative Balance Sheet
December 31, 2019 and 2018
2019 2018
Assets
Total Current Assets $200,000 $100,000
Property, Plant, and Equipment, Net 550,000 500,000
Other Assets 50,000 50,000
Total Assets $800,000 $650,000
Liabilities
Total Current Liabilities $150,000 $100,000
Long-term Debt 350,000 250,000
Total Liabilities 500,000 350,000
Stockholders' Equity
Total Stockholders' Equity 300,000 300,000
Total Liabilities and Stockholders' Equity $800,000 $650,000
25) Use the balance sheet of Chicago, Inc. to calculate the current ratio for 2019 and 2018
Chicago, Inc.
Comparative Balance Sheet
December 31, 2019 and 2018
2019 2018
Assets
Total Current Assets $200,000 $100,000
Property, Plant, and Equipment, Net 550,000 500,000
Other Assets 50,000 50,000
Total Assets $800,000 $650,000
Liabilities
Total Current Liabilities $150,000 $100,000
Long-term Debt 350,000 250,000
Total Liabilities 500,000 350,000
Stockholders' Equity
Total Stockholders' Equity 300,000 300,000
Total Liabilities and Stockholders' Equity $800,000 $650,000
26) The inventory turnover ratio measures the average number of days that inventory is held by a
company.
27) Days' sales in receivables measures the return on average receivables.
28) Days' sales in inventory measures how quickly a company can collect its receivables.
29) The gross profit percentage is an indicator of how well a company is positioned to pay off its short-
term liabilities.
30) An accounts receivable turnover that is too high may indicate that credit is too tight, causing the loss
of sales to good customers.
31) Which of the following items is a measure of a company's ability to collect receivables?
A) inventory turnover ratio
B) current ratio
C) days' sales in receivables
D) account receivable balance
32) Candle Shop, Inc. has net sales on account of $1,800,000. The average net accounts receivable are
$680,000. Calculate the days' sales in receivables.(Use 365 days for any calculations. Round any
intermediate calculations and your final answer to two decimal places.)
A) 322.42 days
B) 365.00 days
C) 137.74 days
D) 2.65 days
33) Elephant, Inc.'s cost of goods sold for the year is $2,000,000, and the average merchandise inventory
for the year is $129,000. Calculate the inventory turnover ratio of the company. (Round your answer to
two decimal places.)
A) 6.45 times
B) 15.50 times
C) 7.75 times
D) 9.36 times
34) Ottawa, Inc. provides the following data:
2019
2018
Cash
$23,000
$22,000
Accounts Receivable, Net
37,000
37,000
Merchandise Inventory
55,000
25,000
Property, Plant, and Equipment, Net
127,000
96,000
Total Assets
$242,000
$180,000
For the year ending December 31, 2019:
Net Credit Sales
$300,000
Cost of Goods Sold
(170,000)
Gross Profit
$130,000
Calculate the days' sales in inventory for 2019. (Use 365 days for any calculations. Round any
intermediate calculations and your final answer to two decimal places.)
A) 53.68
B) 118.09
C) 48.67
D) 85.88
35) National, Inc. provides the following data:
2019
2018
Cash
$45,000
$25,000
Accounts Receivable, Net
138,000
62,000
Merchandise Inventory
70,000
50,000
Property, Plant, and Equipment, Net
200,000
120,000
Total Assets
$453,000
$257,000
For the year ending December 31, 2019:
Net Credit Sales
$250,000
Cost of Goods Sold
(110,000)
Gross Profit
$140,000
Calculate the accounts receivable turnover ratio for 2019. (Round your answer to two decimal places.)
A) 5.00 times
B) 3.28 times
C) 2.50 times
D) 1.81 times
