{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

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

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
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.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Student Name: Class: Problem 14-06 c. Comment on these measurements and evaluate Rentsch, Inc.'s short-term debt-paying ability. RENTSCH, INC. Ratios d.(1) Return on assets: Operating income: Net sales $1,500,000 Less: Cost of goods sold 1,080,000 Operating expenses 315,000 Operating income $105,000
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern