Exercise 13-7 (Algo) Analyzing liquidity LO P3

(1-a) Compute the current ratio for each of the three years.

(2-a) Compute the acid-test ratio for each of the three years.

Required information Use the following information for the Exercises below. (Algo) (The following information applies to the questions displayed below.) Simon Company's year-end balance sheets follow. Current Year 1 Year Ago 2 Years Ago At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Accounts payable Long-term notes payable Common stock, $10 par value Retained earnings Total liabilities and equity $ 31,582 94,282 117,390 10,171 281,871 $ 535,296 $ 38,024 65,897 84,517 9,497 263, 527 $ 461,462 $ 39,625 51,797 56, 278 4,360 240,340 $ 392,400 $ 131,956 102,648 162,500 138,192 $ 535,296 $ 78, 767 105,075 162,500 115, 120 $ 461,462 $ 51,279 84,986 162,500 93.635 $ 392,400 For both the current year and one year ago, compute the following ratios: Exercise 13-7 (Algo) Analyzing liquidity LO P3 (1-a) Compute the current ratio for each of the three years. (1-b) Did the current ratio improve or worsen over the three-year period? (2-a) Compute the acid-test ratio for each of the three years. (2-b) Did the acid-test ratio improve or worsen over the three-year period? Required 1A Required 1B Required 2A Required 2B Compute the current ratio for each of the three years. Numerator: Current assets Current Ratio Denominator: Current liabilities = $ 535,296 1 461,462 Current Year: 1 Year Ago: 2 Years Ago: $ $ Current Ratio Current ratio to 1.16 1 to 1.00 1 to 1.00 1 $ 461,462 X 7 461,462 11 $ 392,400 1 $ 392,400 Required 1A Required 1B > Required 1A Required 10 Required 2A Required 28 Compute the acid-test ratio for each of the three years. Acid-test ratio Numerator Denominator Acid-Test Rato Acid est Current assets . Short-term investments .. Cost of goods sold Accounts receivable net - Foto + 0 Current Year: 1 Year Ago: 2 Years Ago: 0 1 10 1 0 10 11