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schepotkina [342]
4 years ago
6

ritchett Co. reported the following year-end data: Cash $ 15,000 Short-term investments $ 5,000 Accounts receivable (current) $

8,000 Inventory $ 20,000 Other current assets $ 6,000 Total current liabilities $ 20,000 Compute the (a) current ratio and (b) acid-test ratio.
Business
1 answer:
ratelena [41]4 years ago
6 0

Answer:

a.

The current ratio is 2.7

b.

The acid-test ratio is 1.7

Explanation:

a)

The current ratio is a ratio to measure the liquidity of a firm. The current ratio calculates the amount of current assets per every $1 of current liability.

Current ratio = Current assets / Current Liabilities

Current ratio = (15000 + 5000 + 8000 + 20000 + 6000) / 20000

Current ratio = 2.7 or 2.7 : 1

b)

The acid test ratio is also a measure of liquidity that only takes into account the most liquid asset in calculation of the ratio and it excludes the inventory in the calculation.

Acid test ratio = (Current assets - Inventory) / Current liabilities

Acid test ratio = (15000 + 5000 + 8000 + 6000) / 20000

Acid test ratio = 1.7 or 1.7 : 1

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Cox Co. accounts for its inventory using the LIFO cost method. An inventory loss from a permanent market decline of $360,000 occ
kirill115 [55]

Answer:

$360,000

Explanation:

Last in first out (LIFO) is a method used in inventory where the cost of most recently purchased goods is the one to be expensed first. Also current losses are the first to be reported.

An inventory loss incurred in a quarter must not be deferred, but recorded as items within an interim must be reported in the same period they were incurred, unless it can be redeemed before the end of the fiscal year. It is not considered a temporary item.

The loss reported in May will be reported for that quarter in June.

8 0
3 years ago
The value of a firm is maximized when the: Multiple Choice
dsp73

Answer:

weighted average cost of capital is minimized

Explanation:

Weighted average cost of capital (WACC) in accounting is the average rate of return a company is expected to compensate all its various investors by comparing its debt and equity structure.

The value of a firm is maximized when the weighted average cost of capital is minimized.

The formula to calculate the weighted average cost of capital (WACC) is:

WACC = ((E ÷ V) x Re) + (((D ÷ V) x Rd) x (1 - T))

Where;

Re=Cost of equity

Rd=Cost of debt

E=Market value of equity

D=Market value of debt

T=Effective tax rate

V=Total market value of combined equity and debt

4 0
3 years ago
What amount would a person with actual cash value (ACV) coverage receive for three-year-old furniture destroyed by a fire? The f
Lorico [155]

Answer:

The actual cash value a person would receive for a $4,500 destroyed furniture would be:

$3,000

Explanation:

Actual cash value is a method to calculate the value of an insured good. Its formula goes like this: Original value minus the original value divided by the years covered multiplied by two. In our case this would be 4,500-[4,500 / 6 x 2] giving us as result the following operation 4,500- 1500 = 3,000.

5 0
3 years ago
Which are employed by a service firm and assigned to work at a business or an organization
Shkiper50 [21]

Answer: Leased employee

Explanation:

Leased employee are employed by a service firm and assigned to work at a business or an organization.

They are contractual employee and paid on the basis of what is deemed in contract.

6 0
3 years ago
Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the u
Nikitich [7]

Answer:

$14.71

Explanation:

The computation of the predetermined overhead rate is shown below:

Predetermined overhead rate = (Total estimated manufacturing overhead) ÷ (estimated machine hours)

where,

Total estimated manufacturing overhead is

= Estimated total fixed overhead manufacturing overhead + Estimated variable manufacturing overhead × estimated machine hours

= $838,750 + $3.20 × 72,900 machine hours

= $838,750 + $233,280

= $1,072,030

So, the predetermined overhead rate is

= $1,072,030 ÷ 72,900 machine hours

= $14.71

6 0
4 years ago
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