Using the Multi-Step Income Statement and the Comparative Balance Sheets, prepar

Question

Using the Multi-Step Income Statement and the Comparative Balance Sheets, prepare the following Ratios for January 2019:

Current Ratio

Acid-Test Ratio

Debt Ratio

Profit Margin Ratio

Gross Margin Ratio

Be Something Income Statement For Month of January, 2019 ales ess Sales discount ales returns and allowrances et Sales ost of Goods Sold ross Profit perating Expenses 139000 800 30003 135200 84560 50640 Selling Expenses 800 10000 Supplies expense 1200 Stores supplies expense 10000 Office Salaries 15000 Sales Payroll Tax 800 e2800 Total Selling exe 40600 Sales salaries expense eneral and Adminstrative expenses Depreciation expense-Office Equipment2500 Utilites Office 1500 Utilities Store 1100 300 Depreciation Expense-Building 750 Amortization Expense-Patents700 nsurance200 Repair expense 2500 Bad Debt expse 460 Total General and Adminstrative 10010 Office Supplies expense otal Operations expense ncome from Operations ther Revenues and Gains 30 Interest Revenue 60 Interest Expense 5878 5818 /88 et Income

Explanation / Answer

Current ratio = Current assets/Current liabilities = 738380/37278 = 19.81 : 1

Acid-test ratio = Quick assets/Current liabilities = 720090/37278 = 19.32 : 1

Debt ratio = Total liabilities/Total assets = 1013378/1757880 = 0.58

Profit margin ratio = Net income/Total revenues = -5788/(135200 + 60) = -5788/135260 = -4.28%

Gross margin ratio = Gross profit/Net sales = 50640/135200 = 37.46%

Current assets: Cash 687490 Accounts receivable 23000 Allowance for doubtful accounts -460 Interest receivable 60 Notes receivable 10000 Merchandise inventory 5190 Store supplies 10000 Office supplies 300 Prepaid insurance 2800 Total current assets 738380 Current liabilities: Accounts payable 25000 Income taxes payable 7500 Interest payable 4778 Total current liabilities 37278

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