Abanaki Carpets reported the following amounts in its 2011 financial statements. The 2010 figures are given for comparison.

Requirements
1. Calculate Abanaki’s acid-test ratio for 2011. Determine whether Abanaki s acid- test ratio improved or deteriorated from 2010 to 2011. How does Abanaki s acid-test ratio compare with the industry average of 0.80?
2. Calculate the days’ sales in receivables for 2011. How do the results compare with Abanaki’s credit terms of net 30?

Transcribed Image Text:

Current assets: Cash Short-term investments Accounts receivable Less: Allowance for uncollectibles Inventory Prepaid insurance Total current assets Total current liabilities. Net sales.. 2011 2010 6,000 $ 12,000 22,000 11,000 $ 61,000 $ 74,000 (7,000) 54,000 (6,000) 68,000 194,000 3,000 190,000 3,000 $ 279,000 $ 284,000 $ 107,000 $ 109,000 $ 730,000 $ 733,000