Case Study 21-2, p. 769

Create your own Microsoft Excel workbook, and format it to answer your questions.

Note. Show all work and calculations. (The use of Microsoft Excel software is required.)

           21.2 Balanced Books Bookkeeping

Jessica and David are student interns at Balanced Books Bookkeeping. They have taken several business math and accounting classes and are now applying what they have learned to real-life situations. They enjoy their internship, but they are sometimes surprised by the assignments they are given. Luckily, they work together, so they share the assignments and learn from each other. Their most recent assignment is to take a listing of accounts provided by one of Balanced Books’ clients and turn them into a balance sheet and income statement. David suggests that their client might appreciate it if they also performed a vertical analysis of each statement. Jessica suggests that they should also compute the current ratio and the acid-test ratio.

1. Create the financial statements for December 31, 2011, depict them in vertical format, and compute the current and acid test ratios.

Account title       Amount

Cash                  $4,000

Depreciation       2,000

Carlton, equity   34,500

Cost of goods sold  85,000

Rent expense      15,000

Wages payable    1,500

Utilities                 6,500

Miscellaneous expenses  1,500

Accounts payable          $3,500

Merchandise inventory 15,000

Accounts receivable  6,000

Net sales                120,000

Insurance payable    500

Equipment               15,000

 

Wages                      8,000