Question

January 2 Sold gift cards totaling $8,000. The cards are redeemable for merchandise within one year of the purchase date. January 6 Purchase additional inventory on account, $147,000. January 15 Firework sales for the first half of the month total $135,000. All of these sales are on account. The cost of the units sold is $73,800. January 23 Receive $125,400 from customers on accounts receivable. January 25 Pay $90,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $4,800. January 30 Firework sales for the second half of the month total $143,000. Sales include $11,000 for cash and $132,000 on account. The cost of the units sold is $79,500. January 31 Pay cash for monthly salaries, $52,000. 7. Analyze the following for ACME Fireworks Requirement 1: a-1. Calculate the current ratio at the end of January.

Answer 1

Answer: The answer is 3:8

Explanation:

To calculate cash sales

Total Sales = 135,000 + 143,000 = 278,000

Therefore cash Sales = Cost per unit sold for first half divided by cost per unit for second half multiply by total sales for both first and second half

= 73,800/79,500× 278,000

= 258,067.92

To calculate current Asset

$

Cash. 258,067.92

Account Receivable. 125,400

Debtor 8,000

Less: provision for bad debt 4,800. 3,200

Inventory. 147,000

------------

533,667.92

------------

To calculate current Liabilities

$

Account payable. 90,000

Accrued Salary. 52,000

-----------

142,000

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Therefore Current Ratio = Current Assets / Current Liabilities

= 533,667.92/142,000

=3.75

The current ratio is 3.8 Approximately