Answer:
Simon Company
1-a) Current ratio =                          1.88            2.52             2.87
= Current assets/Current liabilities
1-b. The current ratio worsened over the three-year period.
2-a) Acid-test ratio =                      1.02            1.43             1.81
= (Current assets - Inventory)/Current liabilities
2-b) The acid-test ratio worsened over the three-year period.
Explanation:
a) Data and Calculations:
At December 31                        Current Yr     1 Yr Ago       2 Yrs Ago 
Assets 
Cash                                             $ 31,800    $ 35,625        $ 37,800 
Accounts receivable, net              89,500        62,500          50,200 
Merchandise inventory                112,500        82,500          54,000 
Prepaid expenses                          10,700          9,375            5,000
Total current assets                 $244,500    $190,000      $147,000
Plant assets, net                         278,500     255,000       230,500 
Total assets                            $ 523,000   $ 445,000    $ 377,500 
Liabilities and Equity 
Accounts payable                   $ 129,900     $ 75,250      $ 51,250 
Long-term notes payable secured by
  mortgages on plant assets      98,500        101,500        83,500 
Common stock, $10 par value 163,500       163,500       163,500 
Retained earnings                      131,100       104,750         79,250 
Total liabilities and equity    $ 523,000   $ 445,000   $ 377,500
1-a) Current ratio =                          1.88            2.52             2.87
= Current assets/Current liabilities
=  Total current assets                 $244,500    $190,000      $147,000
     Accounts payable                   $ 129,900     $ 75,250      $ 51,250 
1-b. The current ratio worsened over the three-year period.
2-a) Acid-test ratio =                      1.02            1.43             1.81
= (Current assets - Inventory)/Current liabilities
Current assets - Inventory       $132,000    $107,500      $93,000
Accounts payable                   $ 129,900     $ 75,250      $ 51,250 
2-b) The acid-test ratio worsened over the three-year period.