Ellis Worton, the owner of Worton Consulting, showed the following unadjusted account balances at December 31, 2014, the business's year-end (accounts have been listed in alphabetical order):
Account Account Balance
Accounts payable ................................................................ $31,500
Accounts receivable ............................................................. . 46,250
Accumulated depreciation, store fixtures ...................................... 61,000
Cash ................................................................................. 19,340
Cost of goods sold .............................................................. 469,000
Delivery expense ................................................................. 11,330
Ellis Worton, capital ............................................................. 89,560
Ellis Worton, withdrawals ....................................................... 69,000
Interest expense .................................................................... 2,240
Notes payable (principal of $20,000 to be paid in 2015) ................... 56,000
Petty cash ............................................................................. 350
Prepaid rent ....................................................................... 16,200
Rent expense ...................................................................... 11,250
Salaries expense ................................................................ 21 3,000
Salaries payable .................................................................. 17,750
Sales .............................................................................. 721,400
Sales returns and allowances .................................................... 6,000
Store fixtures ................................................................... 11 3,250
*Assume normal account balances.
Other information:
1. There were two reconciling items on the bank reconciliation: an outstanding cheque in the amount of $620 and an NSF cheque for $2,835.
2.A review of the Prepaid Rent account showed that the unexpired portion was $2,250.
3. Annual depreciation on the store fixtures is $7,900.
Required
Prepare the December 31, 2014, classified balance sheet. Analysis Component:
a.Calculate Worton Consulting's current ratio and acid-test ratio at December 31, 2014. Compare and comment. Round calculations to two decimal places
b.Recalculate the current ratio and acid-test ratio assuming the current portion of the note payable was reported as part of the long-term liabilities. Compare your results to part (a) and comment. Round calculations to two decimal places