Question - Dunder Mifflin had the following balances in selected accounts at the end of 2015 and 2016.
|
2015
|
2016
|
|
Cash
|
$58,000
|
$45,000
|
|
Short-term investments
|
46,000
|
39,000
|
|
Accounts receivable
|
54,000
|
61,000
|
|
Allowance for uncollectible accounts
|
3,500
|
5,000
|
|
Inventory
|
78,000
|
98,000
|
|
Accounts payable
|
91,000
|
102,000
|
|
Wages payable
|
17,000
|
25,000
|
|
Income tax payable
|
4,500
|
6,500
|
|
Note payable (due 2022)
|
100,000
|
100,000
|
|
Sales
|
415,000
|
525,000
|
|
Cost of goods sold
|
225,000
|
304,000
|
The accounts receivable at the end of 2014 were $50,000 and the allowance for uncollectible accounts was $2,500.
Required:
1. Calculate the acid test ratio for 2015 and 2016 for Dunder Mifflin.
2. Calculate the days sales in receivables for 2015 and 2016 for Dunder Mifflin.
3. Determine whether the acid-test ratio improved or deteriorated from 2015 to 2016.
4. Determine whether the collection period increased or decreased from 2015 to 2016.