chapter5_classDE

chapter5_classDE - Chapter 5 Quick Study 5-4 (10 minutes)...

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Unformatted text preview: Chapter 5 Quick Study 5-4 (10 minutes) July 31 Cost of Goods Sold ...................................................................... 1,400 Merchandise Inventory ...................................................... 1,400 .............................................. To adjust for shrinkage based on .......................................... physical count [$42,000 - $40,600]. Quick Study 5-6 (10 minutes) Acid-test ratio = ($3,000 + $5,580) / ($11,500 + $1,700) = 0.65 Explanation of acid-test ratio : The acid-test ratio is used to evaluate (reflect on) the liquidity of a company. It helps in determining whether a company will be able to meet its current obligations as they come due with its most liquid assets. In this case, the company only has 65 cents available in quick assets to pay $1.00 in current liabilities as they come due. An acid-test ratio less than one usually suggests some concern and encourages further analysis of liquidity Problem 5-2A (40 minutes) Aug. 1...........................................................................................................Merchandise Inventory ......................................................................................................................7,800 ...................................................................................................................... Accounts PayableArotek ......................................................................................................................7,800 Purchased goods on credit, terms 1/10, n/30. 4Accounts PayableArotek................................................................ 270 ...................................................................................................................... Cash 270 ................................................................................................ Paid freight for Arotek. 5Accounts ReceivableLarton........................................................... 5,460 ...................................................................................................................... Sales 5,460 Sold goods on credit, terms 2/10, n/60. 5Cost of Goods Sold............................................................................ 3,898 ...................................................................................................................... Merchandise Inventory ......................................................................................................................3,898 To record the cost of August 5 sale. 8Merchandise Inventory...................................................................... 7,100 ...................................................................................................................... Accounts PayableFrees ......................................................................................................................7,100 Purchased goods on credit, terms 1/10, n/45....
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chapter5_classDE - Chapter 5 Quick Study 5-4 (10 minutes)...

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