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Mgmt 200 Assignment Soln 3-23-11

# Mgmt 200 Assignment Soln 3-23-11 - \$165 Ã \$92 = 1.79 After...

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Management 200 – Introductory Financial Accounting– Spring 2011 Krannert School of Management - Purdue University Solutions to class assignment for March 23, 2011 Additional Perspectives 8-3 Requirement 1 (\$ in millions) Total Current Assets ÷ Total Current Liabilities = Current Ratio 2010 \$265 ÷ \$92 = 2.88 2009 \$287 ÷ \$89 = 3.22 The current ratio weakened in the more recent year. Requirement 2 (\$ in millions) Quick Assets ÷ Total Current Liabilities = Acid-Test Ratio 2010 \$165 ÷ \$92 = 1.79 2009 \$1585 ÷ \$89 = 2.08 The acid-test ratio weakened in the more recent year. Requirement 3 If The Buckle purchased \$50 million of inventory by debiting inventory and crediting accounts payable, its current ratio and acid-test ratio would weaken. The calculations are provided as follows: (\$ in millions) Total Current Assets ÷ Total Current Liabilities = Current Ratio Before \$265 ÷ \$92 = 2.88 After \$265 + \$50 ÷ \$92 + \$50 = 2.22 (\$ in millions) Quick Assets ÷ Total Current Liabilities = Acid-Test Ratio Before

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Unformatted text preview: \$165 Ã· \$92 = 1.79 After \$165 Ã· \$92 + \$50 = 1.16 Additional Perspectives 8-1 Requirement 1 The loss contingency is probable and reasonably estimable, so it must be recorded as follows: Loss 120,000 Contingent Liability 120,000 (Record the loss contingency) Requirement 2 Great Adventures would record a loss and a liability for the minimum amount (\$100,000) and disclose the range between \$100,000 and \$150,000 in the footnotes to the financial statements. The journal entry is as follows: Loss 100,000 Contingent Liability 100,000 (Record the loss contingency) Requirement 3 If the likelihood of loss is reasonably possible rather than probable, we record no entry but make full disclosure in a footnote to the financial statements to describe the contingency. Requirement 4 If the likelihood of loss is remote, disclosure is usually not required....
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Mgmt 200 Assignment Soln 3-23-11 - \$165 Ã \$92 = 1.79 After...

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