Question

imon Company’s year-end balance sheets follow.

At December 31	2017			2016			2015
Assets
Cash	$	31,800		$	35,625		$	37,800
Accounts receivable, net		89,500			62,500			50,200
Merchandise inventory		112,500			82,500			54,000
Prepaid expenses		10,700			9,375			5,000
Plant assets, net		278,500			255,000			230,500
Total assets	$	523,000		$	445,000		$	377,500
Liabilities and Equity
Accounts payable	$	129,900		$	75,250		$	51,250
Long-term notes payable secured by mortgages on plant assets		98,500			101,500			83,500
Common stock, $10 par value		163,500			163,500			163,500
Retained earnings		131,100			104,750			79,250
Total liabilities and equity	$	523,000		$	445,000		$	377,500

1. Compute the current ratio for the year ended 2017, 2016, and 2015.
2. Compute the acid-test ratio for the year ended 2017, 2016, and 2015.

Answer 1

1	Current ratio=Current asset/Current liabilities
				2017	2016	2015
	Current assets			244500	190000	147000
	Current liabilities			129900	75250	51250
	Current ratio			1.88	2.52	2.87
2	Acid-test ratio=(Current assets-Inventories)/Current liabilities
				2017	2016	2015
	Current assets			244500	190000	147000
	Less: inventories			112500	82500	54000
				132000	107500	93000
	Current liabilities			129900	75250	51250
	Acid-test ratio			1.02	1.43	1.81
	Note: 1- Current assets
				2017	2016	2015
	Cash			31800	35625	37800
	Accounts receivable,Net			89500	62500	50200
	Merchandise inventory			112500	82500	54000
	Prepaid expenses			10700	9375	5000
	Total current assets			244500	190000	147000
	Note:2- current Liabilities
				2017	2016	2015
	Accounts payable			129900	75250	51250
	Total current liabilities			129900	75250	51250