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Roger Grocery Inc - Measure Liquidity

Some of the accounts appearing in the year-end financial statements of
Roger Grocery, Inc., appear below. This list includes all of the company's
current assets and current liabilities.

See attached file for full problem description.

Some of the accounts appearing in the year-end financial statements of
Roger Grocery, Inc., appear below. This list includes all of the company's
current assets and current liabilities.

Sales $1,880.00
Accumulated depreciation: equipment 370,000
Notes payable (due in 90 days) 70,000
Retained earnings 241.32
Cash 67,600
Capital stock 150,000
Marketable securities 175,040
Accounts payable 127,500
Mortgage payable (due in 15 days) 320,000
Salaries payable 7,570
Dividends 25,000
Income taxes payable 14,600
Accounts receivable 230,540
Inventory 179,600
Unearned revenue 10,000
Unexpired insurance 4,500

Instructions
a. Prepare a schedule of the company's current assets and current
liabilities. Select the appropriate items from the above list.

b. Compare the current ratio and the amount of working capital.
Explain how each of these measurements is computed. State,
with reasons, whether you consider the company to be in a
strong or weak current position.

Attachments

Solution Preview

Some of the accounts appearing in the year-end financial statements of
Roger Grocery, Inc., appear below. This list includes all of the company's
current assets and current liabilities.

Sales $1,880.00
Accumulated depreciation: equipment 370,000
Notes payable (due in 90 days) 70,000
Retained earnings 241.32
Cash 67,600
Capital stock 150,000
Marketable securities 175,040
Accounts payable 127,500
Mortgage payable (due in 15 days) 320,000
Salaries payable 7,570
Dividends 25,000
Income taxes payable 14,600
Accounts receivable 230,540
Inventory 179,600
Unearned revenue 10,000
Unexpired ...

Solution Summary

The solution explains how to prepare the schedule of current assets and liabilities and to calculate the current and quick ratios.

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