Answer:
Current Ratio = 1.67:1
Acid Test Ratio = 0.1:1
Gross Profit Margin = 66%
Explanation:
Cash.......1000
Merchandise inventory...12,500
Store supplies....5800
Prepaid Insurance...2400
Accounts Payable...................10,000
Sales..............................111950
Cost of Goods Sold....38,400
Store supplies still available at fiscal year-end amount to $1,900. Expired insurance, an administrative expense, for the fiscal year is $1,650. Depreciation expense on store equipment, a selling expense, is $1,600 for the fiscal year. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $11,000 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.
Therefore Balance Store supplies = 5800-1900
Prepaid Insurance = 2400-1650
Balance Inventory = 11,000
Current Ratio = Current Assets/ Current liabilities
Current Ratio = (1000 cash + 11,000 inventory + 3,900 Store supplies + 750 prepaid insurance) / 10,000 Accounts payable = 16650/10000 = 1.67
Current Ratio = 1.67:1
Acid test Ratio = Current Asset - inventory / Current Liabilities
(16,650 - 11,000 inventory - 3,900 Store supplies - 750 Prepaid Insurance) /10,000 = 0.1
Acid Test Ratio = 0.1:1
Gross Profit Margin = Gross Profit / Sales x 100
Gross Profit = Sales - Cost of Goods Sold = 111,950 - 38400 = 73550
Therefore Gross profit Margin = 73550/111950 x 100 = 66%
Gross Profit Margin = 66%
