Question

In: Accounting

1. Compute Northtown's current​ ratio, debt​ ratio, and earnings per share. Round all ratios to two...

1.

Compute Northtown's current​ ratio, debt​ ratio, and earnings per share. Round all ratios to two decimal places.

2.

Compute the three ratios after evaluating the effect of each transaction that follows. Consider each transaction separately.

a.

Borrowed $105,000 on a​ long-term note payable.

b.

On January​ 1, Issued $30,000
shares of common​ stock, receiving cash of $367,000.

c.

Paid​ short-term notes​ payable $24,000.

d.

Purchased merchandise of $45,000
on​ account, debiting Inventory.

e.

Received cash on​ account $23,000.

Cash………………………………………. $ 21,000       Accounts Payable……………. $ 100,000

Short-term investments………………….    33,000 Accrued liabilities……………….. 31,000

Accounts receivable, net………………..    86,000 Long-term notes payable……… 166,000

Inventories………………………………. 144,000 Other long-term liabilities…….. 31,000

Prepaid expenses………………………       3,000 Net income…………………..     94,000

Total assets……………………………..    672,000 Number of common

Short-term notes payable……………..      45,000 shares outstanding…………. 48,000

Requirement 1. Compute

Northtown'sNorthtown's

current​ ratio, debt​ ratio, and earnings per share. Round all ratios to two decimal places.

Start by determining the formula for each​ ratio, beginning with the current​ ratio, followed by the debt​ ratio, and then earnings per share.

/

=

Current ratio

/

=

Debt ratio

(

-

) /

=

Earnings per share

Now compute

Northtown'sNorthtown's

current​ ratio, debt​ ratio, and earnings per share. ​(Round all ratios to two decimal​ places.)

Current ratio

Debt ratio

Earnings per share

Requirement 2. Compute the three ratios after evaluating the effect of each transaction that follows. Consider each transaction

separately.

​(Round all ratios to two decimal​ places.)

Current ratio

Debt ratio

Earnings per share

a.

b.

c.

d.

e.

Solutions

Expert Solution

1 Current Ratio Debt Ratio Earning Per Share
                                                                        1.63                                       0.56                              1.96
Current Ratio Debt Ratio Earning Per Share
a                                                                         2.23                                       0.62                              1.96
b                                                                         3.72                                       0.36                              1.21
c                                                                         1.44                                       0.54                              1.96
d                                                                         1.50                                       0.58                              1.96
e                                                                         1.56                                       0.57                              1.96

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