Chapter_14

Chapter_14 - Student Name: Class: Problem 14-06 a. Explain...

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Student Name: Class: Problem 14-06 a. Explain how the interest expense shown in the income statement could be $84,000 when the interest payment appearing in the statement of cash flows is only $79,000. RENTSCH, INC. Ratios b. (1) Current ratio: Current assets: Cash $30,000 Accounts receivable 150,000 Inventory 200,000 Total current assets $380,000 Current liabilities $150,000 Current ratio 2.5 to 1 ^ Correct! (2) Quick ratio: Quick assets: Cash $30,000 Accounts receivable 150,000 Total quick assets $180,000 Current liabilities $150,000 Quick ratio 1.2 to 1 ^ Correct! (3) Working capital: Current assets $380,000 Less: Current liabilities 150,000 Working capital $230,000 ^ Correct! (4) Debt ratio: Total liabilities: Total assets $1,000,000 Less: Total stockholders' equity 300,000 Total liabilities $700,000 Total assets $1,000,000 Debt ratio 70% ^ Correct! $84000 of interest expenses were generated in the statement period. However, only $79000 were paid in cash. $5000 is carried on the balance sheet as interest payable.
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Student Name: Class: Problem 14-06 c. Comment on these measurements and evaluate Rentsch, Inc.'s short-term debt-paying ability. RENTSCH, INC.
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This note was uploaded on 07/15/2010 for the course ACC ACC50 taught by Professor Smith during the Summer '10 term at Rutgers.

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Chapter_14 - Student Name: Class: Problem 14-06 a. Explain...

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