Financial Statement Ratios The following items, in alphabetical order, are avail

Question

Financial Statement Ratios The following items, in alphabetical order, are available from the records of Bielawski Corporation as of December 31, 2014 and 2013:

Required:

1. Calculate the following as of December 31, 2014, and December 31, 2013. Round current ratio to two decimal places.

December 31, 2014 December 31, 2013 Accounts payable $8,400 $5,200 Accounts receivable 27,830 35,770 Cash 17,500 19,450 Cleaning supplies 450 700 Interest payable 0 1,200 Inventory 24,600 26,200 Marketable securities 6,250 5,020 Note payable, due in six months 0 12,000 Prepaid rent 3,600 4,800 Taxes payable 1,450 1,230 Wages payable 1,200 1,600

Explanation / Answer

Solution : Calculation of Working Capital and Current Ratio

a.

December 31, 2014 December 31, 2013

Working Capital=Current Asset -Current Liabilites Working Capital =C.A.- C.L.   

=80,230-11,050 =91,940-21,230

=69,180 =70710

b.

31.12.2014 31.12.2013

Current Ratio = Current Assets /Currents Liabilties    Current Ratio = Current Assets /Currents Liabilties

=80230/11050 = 91940/21230

=7.26:1 =4.33:1   

working Notes: Calculation of Current Assets and Current Liabilities

Current Assets 31.12.2014 31.12.2013 Account Receivable 27380.00 35770.00 Cash 17500.00 19450.00 Clean Suppiles 450.00 700.00 Inventory 24600.00 26200.00 Marketble Securities 6250.00 5020.00 Prepaid Rent 3600.00 4800.00 TOTAL 80230.00 91940.00 Current Liabilties 31.12.2014 31.12.2013 Accounts Payable 8400.00 5200.00 Interest Payable 0.00 1200.00 Note Payable 0.00 12000.00 Tax Payable 1450.00 1230.00 Wages Payable 1200.00 1600.00 TOTAL 11050.00 21230.00

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