Evaluate the following information for Team Shirts: Part A: ...

[cartlidgeashley]

Evaluate the following information for Team Shirts:
 
  Part A: Calculate the current ratio for Team Shirts (round to two decimal places).
  Part B: Is the ratio acceptable or unacceptable? Why?
  Part C: Advise Team Shirts how to improve the ratio.
 
   Assets Liabilities and shareholders' equity
 
  Cash  9,000 Accounts payable  10,750
  Accounts receivable 4,430 Wages payable 250
  Supplies 2,690 Common stock 6,000
  Prepaid insurance 3,000 Retained earnings 2,120

Question 2

For the year ended December 31, Depot Max's cost of merchandise sold was 56,900 . Inventory at the beginningof the year was 6,540 . Ending inventory was 7,250 . Compute Depot Max's inventory turnover for the year.
 a. 8.7
  b. 7.8
  c. 8.3
  d. 44.0

[Ddddd]

Answer to Question 1

Part A. Total current assets = 9,000 + 4,430 + 2,690 + 3,000 = 19,120
Total current liabilities = 10,750 + 250 = 11,000
Current ratio: 19,120/11,000 = 1.74
Part B. This is an acceptable ratio because all of the current liabilities are covered by current assets.
Part C. If Team Shirts wants to improve this ratio, it could pay off some of the accounts payable and/or increase the amount of cash by borrowing on a long-term note.

Answer to Question 2

c

[cartlidgeashley]

Excellent

[Sarahjh]

YES! Correct, THANKS for helping me on my review