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Classifying Balance Sheet and Income Statement Accounts and Computing Quick Ratio El Puerto de Liverpool (Liverpool) is...

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Accounting

Classifying Balance Sheet and Income Statement Accounts andComputing Quick Ratio
El Puerto de Liverpool (Liverpool) is a large retailer in Mexico.The following accounts are selected from its annual report for thefiscal year ended December 31, 2013. The amounts below are inthousands of Mexican pesos.

a. Indicate the appropriate classification of each account asappearing in either its balance sheet (B) or its income statement(I).

(Pesos thousands)AmountClassification
Total Revenue148,210,888I
Retained Earning100,695,564B
Inventory22,843,938B
administration expenses38,795,562I
total assets189,873,808B
long term loans from financial institution1,842,912B
financing costs2,177,784I
total current assests65,724,069B
total stockholder equity109,654,664B
prepaid equity1,234,774B
total non-credit liabilities28,966,202B


b. Determine Liverpool's total liabilities and current liabilitiesas of December 31 2013.

Total liabilities:

Total current liabilities:

c. Calculate Liverpool's quick ratio as of December 31, 2013.(Assume that Liverpool only has five types of current assets- cash,marketable securities, accounts receivable, inventory and prepaidexpenses.) Round your answers to two decimal places.

Quick Ratio:

Answer & Explanation Solved by verified expert
4.3 Ratings (530 Votes)

Answer: a

Classification

Total revenue

Revenue

Income Statement

Retained earnings

Equity

Balances sheet

Inventory

Current assets

Balances sheet

Administration expenses

Operating expenses

Income Statement

Total assets

Assets

Balances sheet

Long term loans

Long term liabilities

Balances sheet

Financing cost

Non operating expenses

Income Statement

Total current assets

Assets

Balances sheet

Total stock holders equity

Equity

Balances sheet

Prepaid expenses

Current assets

Balances sheet

Total non current liabilities

Liabilities

Balances sheet

Answer: b

Total Liabilities = Total assets = 189,873,808

Current Liabilities = Total liabilities - (total equity + Non current liabilities)

= 189,873,808 - (109,654,664 + 28,966,202)

= 189,873,808 – 138,620,866 = 51,252,942

Answer: c

Quick ratio = Quick assets / Current liabilities

Calculation of Quick Assets:

Current assets

65,724,069

(-) Inventory

22,843,938

(-) Prepaid expenses

12,34,774

Quick assets

41,645,357
  • Then Quick Ratio = = 41,645,357 / 51,252,942 = 0.81
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