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               Acountspayable            $ 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