Case Study 21.2: Balanced Books Bookkeeping

Jessica & David are student interns at Balance Books Bookkeeping. They have taken several business math accounting classes & 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 & learn from each other. Their most recent assignment is to take a listing of accounts provided by one of balanced Books' clients & turn them into a balance sheet & income sheet & income statement. David suggests that their client might appreciate it if they also performed a vertical analysis of each statement. Jessica suggests that each statement. Jessica suggests that they should also compute the current ratio & the acid-test ratio.

1. Create the financial statements for Dec 31, 2011, depict them in vertical format, & compute the current & acid test ratios.

Account Title Amount Account Title Amount
Cash $ 4,000.00 Acounts payable $ 3,500.00
Depreciation 2,000 Merchandise inventory 15,000
Carlton, equity 34,500 Accounts receivables 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
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