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Dunder Mifflin had the following balances in selected accounts at the end of 2015 and 2016. 2015 2016 Cash $58,000 $45,000 Short-term investments 46,000 39,000

Dunder Mifflin had the following balances in selected accounts at the end of 2015 and 2016.

2015

2016

Cash

$58,000

$45,000

Short-term investments

46,000

39,000

Accounts receivable

54,000

61,000

Allowance for uncollectible accounts

3,500

5,000

Inventory

78,000

98,000

Accounts payable

91,000

102,000

Wages payable

17,000

25,000

Income tax payable

4,500

6,500

Note payable (due 2022)

100,000

100,000

Sales

415,000

525,000

Cost of goods sold

225,000

304,000

The accounts receivable at the end of 2014 were $50,000 and the allowance for uncollectible accounts was $2,500.

Required:

  1. Calculate the acid test ratio for 2015 and 2016 for Dunder Mifflin.
  2. Calculate the days sales in receivables for 2015 and 2016 for Dunder Mifflin.
  3. Determine whether the acid-test ratio improved or deteriorated from 2015 to 2016.
  4. Determine whether the collection period increased or decreased from 2015 to 2016.

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