Question

Store supplies still available at fiscal year-end amount to $2,050. Expired insurance, an administrative expense, for the fiscal year is $1,600. Depreciation expense on store equipment, a selling expense, is $1,575 for the fiscal year. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,100 of inventory is still available at fiscal year-end. 4. Compute the current ratio, acid-test ratio, and gross margin ratio as of January 31, 2018

Answer 1

Answer:

The Current Ratio = 7.59

The  Acid test Ratio = 1.28

The Gross margin ratio = (Gross profit)/(Total Revenue)

where gross profit = Sales- Cost Of Sales:

Explanation:

The First step to take is to calculate the current ratio which is the measure of current liabilities and assets  

The the formula is :

The ratio (Current) = (current assets)/ (current liabilities)

The current assets are assets that given here, the store supplies balance of $2050 then further we have Inventory( Stock) balance at the year end of $10100 or assets that are liquidated or in 12 months or less.  

Then

The current liabilities are those liabilities that an admin expense which means that these are Differed expenses which are a liability that will be paid off in the next accounting period which amount to $1600 Or that  can be paid in 12 months or lesser  of which here we are given expired insurance and. Therefore the current ratio will be:

The Current Ratio = ($2050+$10100)/($1600)

   Current ratio = 7.59 correct to two decimal places.

The acid test ratio is calculated by adding up all the most liquid able assets over the total liabilities in the company. the formula is given as,

The Acid test ratio = (most liquidable assets)/(Total Liabilities)

Which is,

Acid Test Ratio = ($2050)/($1600)

Acid Test Ratio = 1.28 correct to two decimal places

When  the most liquidable asset is the store supplies and the total given liabilities are the one given for the expired insurance and an admin expense.

The last ratio is the gross margin ratio which is calculated by dividing he gross profit of a company by the total revenue a company gains

Therefore,

the formula is Gross Margin Ratio = (Gross profit)/(Total Revenue), where Gross profit = Sales - Cost of Sales. Then to find the Total Revenue which is the Gross Profit - Operating expenses.

Answer 2

Answer:

Current Ratio = 7.59

Acid test Ratio = 1.28

Gross margin ratio = (Gross profit)/(Total Revenue)

where gross profit = Sales- Cost Of Sales

Explanation:

The first ratio that we must calculate is the current ratio which is the measure of current assets and current liabilities which the formula is :

Current ratio = (current assets)/ (current liabilities)

which current assets are assets that are liquidated in 12 months or less which given here the store supplies balance of $2050 then further we have Inventory( Stock) balance at the year end of $10100

Then current liabilities are those liabilities that can be paid in 12 months or less of which here we are given expired insurance and an admin expense which means that these are Differed expenses which are a liability that will be paid off in the next accounting period which amount to $1600. Therefore the current ratio will be ; Current Ratio = ($2050+$10100)/($1600)

                                          Current ratio = 7.59 correct to two decimal places.

The acid test ratio is calculated by adding up all the most liquid able assets over the total liabilities in the company. the formula is

Acid test ratio = (most liquidable assets)/(Total Liabilities)

Acid Test Ratio = ($2050)/($1600)

Acid Test Ratio = 1.28 correct to two decimal places

where the most liquidable asset is the store supplies and the total given liabilities are the one given for the expired insurance and an admin expense.

The last ratio is the gross margin ratio which is calculated by dividing he gross profit of a company by the total revenue a company gains which the formula is Gross Margin Ratio = (Gross profit)/(Total Revenue), where Gross profit = Sales - Cost of Sales. Then to find the Total Revenue which is the Gross Profit - Operating expenses.