I have attached the assignment. Please look over the first few questions for corrections and show work on the following problems.

05/4/2017 Financial Reporting 5.5 Week 5 Assignment Information used to answer comes from the textbook and our chapter PowerPoint. Q6-7. Rachit Company has cash that has been frozen in a bank in Cuba. Should this cash be classified as a current asset? Discuss. This should not be listed as a current asset because it is not accessible and it is unknown if it will be again. A current asset needs to be realized within one year or within the operating cycle of the business. Q6-10 List two computations that are used to determine the liquidity of receivables. -Accounts Receivable Turnover - Accounts Receivable Turnover in Days Q6-14 A company that uses a natural business year, or ends its year when business is at its peak, will tend to distort the liquidity of its receivables when end-of-year and beginning-ofyear receivables are used in computations. Explain how a company that uses a natural business year or ends its year when business is at a peak can eliminate the distortion in its liquidity computations. From the PowerPoint it shows that overstatement can be caused by a couple different factors. Sales volume expands materially late in the year, uncollectible receivables should have been written off, a company seasonally dates invoices and receivables are on the installment basis. Understatement can be caused by sales volume decreasing materially late in the year, a material amount of sales is on a cash basis and a company has a factoring arrangement in which a material amount of receivables is sold. Calculating Accounts Receivable Turnover will be more accurate and masks seasonal fluctuations. This is calculated by (Net Sales/Average Gross Receivables). Q6-28 In determining the short-term liquidity of a firm, the current ratio is usually considered to be the better guide than the acid-test ratio, and the acid-test ratio is considered to be a better guide than the cash ratio. Discuss when the acid-test ratio would be preferred over the current ratio and when the cash ratio would be preferred over the acid-test ratio. The acid-test ratio is preferred over the current ratio when an analyst is calculating the immediate liquidity of the firm. The assets with the most liquidity are compared to current liabilities. The current ratio is mainly used when calculating short-term debt-paying ability. The cash ratio is a conservative calculation to see how much cash and marketable securities there are to cover current liabilities. This is used more with slow-moving inventories and receivables. An entity that is highly speculative will use this ratio. P6-3 Mr. Williams, the owner of Williams Produce, wants to maintain control over accounts receivable. He understands that days' sales in receivables and accounts receivable turnover will give a good indication of how well receivables are being managed. Williams Produce does 60% of its business during June, July and August. Mr. Williams provided the following pertinent data. For the year ended For the year ended July 31, December 31, 2011 2011 Net Sales $800,000 $790,000 Receivables, less allowance 50,000 89,000 for doubtful accounts Beginning of period (allowance January 1, $3,000; August 1, $4,000) End of period (allowance 55,400 90,150 December 31, $3,500; July 31, $4,100) a) Compute the days' sales in receivables for July 31, 2011, and December 31, 2011, based on the accompanying data. b) Compute the accounts receivable turnover for the period ended July 31, 2011, and December 31, 2011. (Use year-end gross receivables.) c) Comment on the results from (a) and (b). P6-10 Laura Badora Company has been using LIFO inventory. The company is required to disclose the replacement cost of its inventory and the replacement cost of its cost of goods sold on its annual statements. Selected data for the year end 2011 are as follows: Ending accounts receivable, less allowance for doubtful accounts of $25,000 $480,000 Ending inventory, LIFO (estimated replacement $900,000) 570,000 Net Sales 3,650,000 Cost of Goods sold (estimated replacement cost $3,150,000) 2,850,000 a) Compute the days' sales in receivables. b) Compute the days' sales in inventory, using the cost figure. c) Compute the days' sales in inventory using the replacement cost for the inventory and the cost of goods sold. d) Should replacement cost of inventory and cost of goods sold be used, when possible, when computing days' sales in inventory? Discuss. P6-12 Individual transactions often have a significant impact on ratios. This problem will consider the direction of such an impact. a. Cash is acquired through issuance of additional b. common stock. Merchandise is sold for cash. (Assume a profit.) c. A fixed asset is sold for more than book value. d. Payment is made to trade creditors for previous e. purchases. A cash dividend is declared and paid. f. A stock dividend is declared and paid. g. Cash is obtained through long-term bank loans. h. A profitable firm increases its fixed assets i. depreciation allowance account. Current operating expenses are paid. j. Ten-year notes are issued to pay off accounts k. payable. Accounts receivable are collected. l. Equipment is purchased with short-term notes. m. Merchandise is purchased on credit. n. The estimated taxes payable are increased. o. Marketable securities are sold below cost. Total Total Net Current Current Current Working Ratio Assets Liabilities Capital Required: Indicate the effects of the previous transactions on each of the following: total current assets, total current liabilities, net working capital, and current ratio. Use + to indicate an increase, - to indicate a decrease, and 0 to indicate no effect