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In: Accounting

can some one check my answer Bloom, Inc. operates department stores in numerous states. Selected financial...

can some one check my answer

Bloom, Inc. operates department stores in numerous states. Selected financial statement data are as follows.

Bloom Inc.

Balance Sheet (partial)

(in millions) 2020 2019

Cash and cash equivalents $ 358 $ 403

Accounts receivable (net) 1,788 684 Inventory 957 997

Prepaid expenses 78 61

Other current assets 181 597

Total current assets $3,362 $2,742

Total current liabilities $1,350 $1,433

Compute liquidity ratios and compare results. For the year 2020, net sales were $8,828, and cost of goods sold was $5,862 (in millions). Instructions

(a) Compute the four liquidity ratios at the end of the year

1 Current ratio of 2019 = current assets/ current liabilities

= $2,742 / $1,433

= $1.91

Current ratio of 2020 = current assets/ current liabilities

= $3,363 / $1,350

= $2.49

2 Acid test (quick) ratio of 2019 = quick assets/ quick liabilities

= ($403 + $684)/ $1,433

= $0.76

Acid test (quick) ratio of 2020 = quick assets/ quick liabilities

= ($ 358+1,788 )/ $1,350

= $1.58

3 Inventory turnover of 2019 = Cost of goods sold / Average Inventory

Inventory turnover of 2020 = Cost of goods sold / Average Inventory

= $5,862 /((1,788 +684)/2)

= $6.12

4 Account time receivable = net sale / average account receivable

= $8,828/ ((1,788 +684)/2)

=7.14

Expert Solution

Following are the things that need to be corrected in the solution:

1. Current assets in the year 2020 should be $3,362 instead of $3,363.

2. Formula for Acid test ratio = Quick assets/ Current liabilities instead of Quick assets/ Quick liabilities.

3. Acid test (quick) ratio of 2020 = quick assets/ quick liabilities

= ($ 358+1,788 )/ $1,350

= 1.59 instead of $1.58

4. Inventory turnover of 2020 = Cost of goods sold / Average Inventory

= $5,862 /((957 +997)/2)

= 6

You took accounts receivable instead of inventory in the above calculation and keep in mind whenever you calculate these ratio's answer should not be in $ terms.

All the other parts were correct.

ekkarill92 answered 1 year ago

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