Jessica and David are student interns at Balanced BooksBookkeeping. T

Jessica and
David are student interns at Balanced BooksBookkeeping. They have taken several
business math andaccounting 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 Account title Amount
Cash $4,000
Accounts payable $3,500
Depreciation
2,000 Merchandise inventory 15,000
Carlton,
equity 34,500 Accounts receivable 6,000
Cost of
goods sold 85,000 Net sales 120,000
Rent expense
15,000 Insurance payable 500
Wages
payable 1,500 Equipment 15,000
Utilities
6,500 Wages 8,000
Miscellaneous
expenses 1,500