Frizell Company has the following comparative balance sheet data. FRIZELL COMPAN

Question

Frizell Company has the following comparative balance sheet data.

FRIZELL COMPANY
Balance Sheets
December 31

2017

2016

Additional information for 2017:

Compute the following ratios at December 31, 2017. (Round answers to 1 decimal place, e.g. 1.6 .)

FRIZELL COMPANY
Balance Sheets
December 31

2017

2016

Cash $ 14,700 $ 30,600 Accounts receivable (net) 69,300 60,300 Inventory 59,800 49,200 Plant assets (net) 202,500 176,500 $346,300 $316,600 Accounts payable $50,500 $59,800 Mortgage payable (6%) 110,000 110,000 Common stock, $10 par 143,000 123,000 Retained earnings 42,800 23,800 $346,300 $316,600

Explanation / Answer

a)

Current ratio = Current Asset/Current Liabilty

Current ratio = (Cash + Accounts receivable (net) + Inventory)/Accounts payable

Current ratio = (14700+69300+59800)/50500

Current ratio = 2.8 : 1

b)

Acid-test ratio = Quick Asset/Current Liabilty

Acid-test ratio =(Cash + Accounts receivable (net) )/Accounts payable

Acid-test ratio =  (14700+6930)/50500

Acid-test ratio = 0.4 to 1

c)

Accounts receivable turnover = Net Sale/ Average account recievable

Net Sale = Sales on account - Sales returns and allowances

Net Sale = 412500-19400

Net Sale =393100

Average account recievable = (Beginning account recievable + Ending account recievable )/2

Average account recievable = ( 69300+60300)/2

Average account recievable = 64800

Accounts receivable turnover = 393100/64800

Accounts receivable turnover = 6.1 times

d)

Inventory turnover = Cost of goods sold / Average Inventory

Cost of goods sold = 196300

Average Inventory = (59800+ 49200)/2

Average Inventory = 54500

Inventory turnover = 196300/54500

Inventory turnover = 3.6 times

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.