Chapter 13 – Analyzing Financial Statements
Solutions Chapter 13 – Set B Exercises – Libby 8e
E13–1B.
Current Assets
(1)
Current Liabilities
(2)
Current
Ratio
(1 ÷ 2)
Start
$64,000
($64,000 ÷ 1.6)
$40,000
1.60
Transaction (1)
Inventory
+ 8,000
Accts. Pay.
+ 8,000
Subtotal
72,000
48,000
1.50
Transaction (2)*
Cash
– 6,000
$66,000
$48,000
1.375
*Debt and truck are noncurrent items.
E13–2B.
Effect on Current Ratio
1.
Will decrease
2.
Will increase
3.
Will increase, assuming that cash was collected from sale
4.
Will decrease
E13–3B.
Turnover:
Accounts receivable $86,828* ÷ [($5,629 + $4,725) ÷ 2]
=
16.8
Inventory ($96,476 x .45) ÷ [($8,819 + $7,291) ÷ 2]
=
5.4
*$96,476 x 90% = $86,828
Days:
Accounts receivable (365 days ÷ 16.8)
=
21.7
Inventory (365 days ÷ 5.4)
=
67.6
© 2014 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not authorized for sale
or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole
or part.
Accounts receivable (365 days ÷ 6.3)
57.9
Inventory (365 days ÷ 6.9)
52.9
3
E13–7B.
Current Assets
(1)
Current Liabilities
(2)
Current
Ratio
(1 ÷ 2)
Start
$480,000
($480,000 ÷ 2)
$240,000
2.00
Transaction (1)
A/R*
+10,000
Subtotal
490,000
240,000
2.04
Transaction (2)
Dividends pay.
+30,000
490,000
270,000
1.81
Transaction (3)
Cash
Prepaid
-15,000
+15,000
490,000
270,000
1.81
Transaction (4)
Cash
-30,000
Dividends pay.
-30,000
460,000
240,000
1.92
Transaction (5)
Cash
+12,000
-12,000
A/R
460,000
240,000
1.92
Transaction (6)
ST Lia.
+40,000
460,000
280,000
1.64
E13–8B.
Current Ratio
$1,041,805
$435,038
=
2.39
Inventory Turnover
$1,715,815
=
5.45
[($331,741 + $298,000) ÷ 2]
Account Receivable
Turnover
$2,734,830*
=
5.48
[($508,870 + $489,905) ÷ 2]
© 2014 by McGraw-Hill Global Education Holdings, LLC. This is proprietary material solely for authorized instructor use. Not authorized for sale
or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole
or part.
4
E13–9B.
Turnover:
Accounts receivable $720,000* ÷ [($40,000 + $60,000) ÷ 2]
=
14.4
Inventory ($1,200,000 x .50) ÷ [($65,000 + $20,000) ÷ 2]
=
14.1
*$1,200,000 x 60% = $720,000
Days:
Accounts receivable (365 days ÷ 14.4)
=
25.3
Inventory (365 days ÷ 14.1)
=
25.9
E13–10B.
Current Assets
(1)
Current Liabilities
(2)
Current
Ratio
(1 ÷ 2)
Start
$68,000
($68,000 ÷ 1.6)
$42,500
1.60
Transaction (1)
Cash
+ 5,000
No impact
A/R
+5,000
Subtotal
$78,000
Subtotal
42,500
1.84
Transaction (2)
Cash
-8,000
Accounts payable
-8,000
$70,000
$34,500
2.03