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Maureen G.

Accounting Professor and Tutor for Five Years

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Basic Math

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Question:

Get the sum of 3/4 and 1/2.

Maureen G.

Answer:

Fractions can only be added if their denominators are the same. To solve the problem, we need to come up with the least common denominator. That would be 4. To get the new fractions, we apply the least common denominator. Then we get the new numerators. Since 3/4 has 4 already as its denominator, its numerator remains the same. For 1/2 that would be, 4 divided by 2 equals 2, then 2 multiplied by 1 is 2. We can now proceed to addition. 3/4 + 2/4 = 5/4. So the answer is 5/4.

Finance

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Question:

Consli Corporation's current assets were $250,000 (Cash:$150,000; Accounts Receivable:$40,000; Inventory $60,000). The current liabilities were $200,000. Required: 1. Determine the Acid-Test Ratio. 2. What does the Acid-Test Ratio indicate the company's financial health?

Maureen G.

Answer:

1. Acid Test Ratio is equal to Liquid Assets divided by Current Liabilities. First, we determine how much are the liquid assets. In the problem, only Cash and Accounts Receivable are considered liquid. So add Cash: $150,000 and Accounts Receivable: $40,000. That's equal to $190,000. Divide this now by $200,000. The Acid-Test Ratio is 0.95: 1. 2. By common rules of thumb, the acid-test ratio is too low. It indicates that for every $1 of current liability, the company can only pay $0.95 using its liquid assets.

Accounting

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Question:

I think Corporation's stockholders' equity at the beginning and end of the year were $150,000 and $120,000 respectively. Assets at the beginning were $250,000. Liabilities decreased by $20,000 and dividends amounting to $10,000 were declared and paid. How much was the company's net income/(net loss)?

Maureen G.

Answer:

To compute for the net income or net loss for the year, we will focus on the equity section of the accounting equation. We were given: Beginning stockholder' equity - $150,000; Ending stockholders' equity = $120,000; Dividends = $10,000. We will be using this equation: Beginning Stockholder's Equity + Net Income - Dividends = Ending Stockholder's Equity. Using the figures we have: $150,000 + NI (the unknown) - $10,000 = $120,000. To compute for the net income: NI = $120,000 - $150,000 + $10,000 Net Income = ($20,000) So the answer is $20,000 net loss.

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