In: Accounting
On January 1, 2018, the general ledger of ACME Fireworks
includes the following account balances:
Accounts | Debit | Credit | ||||
Cash | $ | 25,100 | ||||
Accounts Receivable | 46,200 | |||||
Allowance for Uncollectible Accounts | $ | 4,200 | ||||
Inventory | 20,000 | |||||
Land | 46,000 | |||||
Equipment | 15,000 | |||||
Accumulated Depreciation | 1,500 | |||||
Accounts Payable | 28,500 | |||||
Notes Payable (6%, due April 1, 2019) | 50,000 | |||||
Common Stock | 35,000 | |||||
Retained Earnings | 33,100 | |||||
Totals | $ | 152,300 | $ | 152,300 | ||
During January 2018, the following transactions occur:
January 2. Sold gift cards totaling $8,000. The cards are
redeemable for merchandise within one year of the purchase
date.
January 6. Purchase additional inventory on account,
$147,000.
January 15. Firework sales for the first half of the month total
$135,000. All of these sales are on account. The cost of the units
sold is $73,800.
January 23. Receive $125,400 from customers on accounts
receivable.
January 25. Pay $90,000 to inventory suppliers on accounts
payable.
January 28. Write off accounts receivable as uncollectible,
$4,800.
January 30. Firework sales for the second half of the month total
$143,000. Sales include $11,000 for cash and $132,000 on account.
The cost of the units sold is $79,500.
January 31. Pay cash for monthly salaries, $52,000.
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Accounts Receivable (Opening Bal) = 46,200
+) Sales during the month = 135,000 + 132,000 = 267,000
–) Cash Received from Debtors = 125,400
–) Allowance for Uncollectible Accounts = 4,800
Accounts Receivable (Closing Bal) = 183,000
Cash (Opening Bal) = 25,100
+) Gift Card Sales = 8,000
+) Cash Received from Debtors = 125,400
+) Sale during the month = 11,000
–) Payments to Creditors = 90,000
–) Salaries Paid = 52,000
Cash (Closing Bal) = 27,500
Inventory (Opening Bal) = 20,000
+) Purchase during the month = 147,000
–) Sale during the month = 73,800
–) Sale during the month = 79,500
Inventory (Closing Bal) = 13,700
Current Liabilities = 103,750
1. Current Ratio :
= (Receivables + Cash + Inventory) / Current Liabilities
= (183,000 + 27,500 + 13,700) / 103,750
= 224,200 / 103,750
= 2.16
2. Quick Ratio :
= (Receivables + Cash) / Current Liabilities
= (183,000 + 27,500) / 103,750
= 210,500 / 103,750
= 2.03