Bennis Company has the following comparative balance sheet data.

BENNIS COMPANY
Balance Sheets
December 31

2011 2010
Cash $ 15,000 $ 30,000
Receivables (net) 70,000 60,000
Inventories 60,000 50,000
Plant assets (net) 200,000
180,000

$345,000
$320,000


Accounts payable $50,000 $60,000
Mortgage payable (15%) 100,000 100,000
Common stock, $10 par 140,000 120,000
Retained earnings 55,000
40,000

$345,000
$320,000


Additional information for 2011:

Net income was $25,000.

Sales on account were $410,000. Sales returns and allowances were $20,000.

Cost of goods sold was $198,000.

The allowance for doubtful accounts was $2,500 on December 31, 2011, and $2,000 on December 31, 2010.

Compute the following ratios at December 31, 2011. (a) Current. (b) Acid-test. (c) Receivables turnover. (d) Inventory turnover. (Round answers to 1 decimal place, e.g. 10.5.)

(a) Current ratio
(b) Acid-test ratio
(c) Receivables turnover
(d) Inventory turnover

Tonya or Chris or whoever,

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To compute the requested ratios, we'll need to use the balance sheet data and additional information given. Here are the steps to calculate each ratio:

(a) Current Ratio:
1. Find the total current assets: Add up the cash, receivables (net), and inventories.
2. Find the total current liabilities: Add up the accounts payable.
3. Divide the total current assets by the total current liabilities.

(b) Acid-Test Ratio:
1. Find the quick assets: Subtract inventories from the total current assets.
2. Find the total current liabilities: Add up the accounts payable.
3. Divide the quick assets by the total current liabilities.

(c) Receivables Turnover:
1. Calculate net credit sales: Subtract the sales returns and allowances from the sales on account.
2. Average net receivables: Add the previous year's and current year's net receivables and divide by 2.
3. Divide the net credit sales by the average net receivables.

(d) Inventory Turnover:
1. Calculate the cost of goods sold.
2. Find the average inventory: Add the previous year's and current year's inventories and divide by 2.
3. Divide the cost of goods sold by the average inventory.

Let's calculate each ratio step-by-step:

(a) Current Ratio:
Total current assets = $15,000 (cash) + $70,000 (receivables) + $60,000 (inventories) = $145,000
Total current liabilities = $50,000 (accounts payable)
Current ratio = Total current assets / Total current liabilities

(b) Acid-Test Ratio:
Quick assets (or quick ratio) = Total current assets - Inventories

(c) Receivables Turnover:
Net credit sales = Sales on account - Sales returns and allowances
Average net receivables = ($60,000 (net receivables, 2010) + $70,000 (net receivables, 2011)) / 2
Receivables turnover = Net credit sales / Average net receivables

(d) Inventory Turnover:
Average inventory = ($50,000 (inventories, 2010) + $60,000 (inventories, 2011)) / 2
Inventory turnover = Cost of goods sold / Average inventory

Let me calculate each ratio for you.

To compute the requested ratios, we need to use the given information and formulas for each ratio.

(a) Current Ratio:
The current ratio is calculated by dividing current assets by current liabilities.

Current Assets = Cash + Receivables (net) + Inventories = $15,000 + $70,000 + $60,000 = $145,000
Current Liabilities = Accounts payable = $50,000

Current Ratio = Current Assets / Current Liabilities = $145,000 / $50,000

To get the value of the current ratio, divide $145,000 by $50,000.

(b) Acid-test Ratio:
The acid-test ratio, also known as the quick ratio, is calculated by excluding inventories from current assets and then dividing by current liabilities.

Quick Assets = Cash + Receivables (net) = $15,000 + $70,000 = $85,000

Acid-test Ratio = Quick Assets / Current Liabilities = $85,000 / $50,000

To get the value of the acid-test ratio, divide $85,000 by $50,000.

(c) Receivables Turnover:
The receivables turnover ratio measures how quickly a company collects its accounts receivable. It is calculated by dividing net credit sales by the average accounts receivable.

Net Credit Sales = Sales on account - Sales returns and allowances = $410,000 - $20,000 = $390,000

Average Accounts Receivable = (Beginning Receivables + Ending Receivables) / 2
Beginning Receivables = Receivables (net) on December 31, 2010 = $60,000
Ending Receivables = Receivables (net) on December 31, 2011 = $70,000

Average Accounts Receivable = ($60,000 + $70,000) / 2

Receivables Turnover = Net Credit Sales / Average Accounts Receivable = $390,000 / Average Accounts Receivable

To get the value of receivables turnover, divide $390,000 by the average accounts receivable.

(d) Inventory Turnover:
The inventory turnover ratio measures how quickly a company sells its inventory. It is calculated by dividing cost of goods sold by the average inventory.

Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Beginning Inventory = Inventory on December 31, 2010 = $50,000
Ending Inventory = Inventory on December 31, 2011 = $60,000

Average Inventory = ($50,000 + $60,000) / 2

Inventory Turnover = Cost of Goods Sold / Average Inventory = $198,000 / Average Inventory

To get the value of the inventory turnover, divide $198,000 by the average inventory.

By following these calculations, you can find the values of each of the requested ratios at December 31, 2011.