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Chapter 3: Q2BTN_4 (page 164)

Key figures for the recent two years of both Apple and Google follow.

Required

1. Compute profit margins for (a) Apple and (b) Google for the two years of data shown.

2. Which company is more successful on the basis of profit margin? Explain.

3. Compute the current ratio for both years for both companies.

4. Which company has the better ability to pay short-term obligations according to the current ratio?

5. Analyze and comment on each company’s current ratios for the past two years.

6. How do Apple’s and Google’s current ratios compare to their industry (assumed) average ratio of 2.0?

Apple Google

\( millions Current Year Prior Year Current Year Prior Year

Net income . \) 53,394 \( 39,510 \)16,348 $14,136

Net sales . 233,715 182,795 74,989 66,001

Current assets . . . . . . . . . . . . . . . 89,378 68,531 90,114 78,656

Current liabilities 80,610 63,448 19,310 16,779

Short Answer

Expert verified

Google company have better ability.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of current ratio

The current ratio is the ratio that shows the current assets available in the company to settle the current liabilities.

02

Comparison of current ratio

Google company has a better ability to pay short-term obligations because current ratio of Google company is better than the Apple company. In current year, current ratio of Google company is 4.66 which is more than the current ratio of Apple that have 1.10.

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Most popular questions from this chapter

Question: Following are two income statements for Alexis Co. for the year ended December 31. The left number

column is prepared before any adjusting entries are recorded, and the right column includes the effects of

adjusting entries. The middle column shows a blank space for each income statement effect of the eight

adjusting entriesathrough g(the balance sheet part of the entries is not shown here). Analyze the statements

and prepare the eight adjusting entries athrough gthat likely were recorded. Note:Answer for ahas

two entries (i) of the \(7,000 adjustment for Fees Earned, 30% (or \)2,100) has been earned but not billed,

and (ii) the other 70% (or \(4,900) has been earned by performing services that were paid for in advance.

ALEXISUnadjusted Adjustments Adjusted

Revenues

Fees earned . \)18,000 a. \(25,000

Commissions earned . 36,500 36,500

Total revenues 54,500 61,500

Expenses

Depreciation expense—Computers 0 b.  1,600

Depreciation expense—Office furniture . 0 c.1,850

Salaries expense 13,500 d. 15,750

Insurance expense . 0 e.1,400

Rent expense 3,800 3,800

Office supplies expense 0 f. 580

Advertising expense 2,500 2,500

Utilities expense . 1,245 g. 1,335

Total expenses . 21,045 28,815

Net income \)33,455 $32,685

In making adjusting entries at the end of its accounting period, Chao Consulting mistakenly forgot to record:

∙ \(3,200 of insurance coverage that had expired (this \)3,200 cost had been initially debited to the Prepaid

Insurance account).

∙ \(2,000 of accrued salaries expense.

As a result of these oversights, the financial statements for the reporting period will [choose one] (1) understate

assets by \)3,200; (2) understate expenses by \(5,200; (3) understate net income by \)2,000; or

(4) overstate liabilities by $2,000.

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets

B. Long-term investments

C. Plant assets

D. Intangible assets

E. Current liabilities

F. Long-term liabilities

G. Equity

4. Interest receivable

Refer to Samsung’s financial statements in Appendix A. What journal entry was likely recorded as of December 31, 2015, to close its Income Summary account?

Garcia Company had the following selected transactions during the year. (A partial chart of accounts follows:

Cash; Accounts Receivable; Prepaid Insurance; Wages Payable; Unearned Revenue; Revenue;

Wages Expense; Insurance Expense; Depreciation Expense.)

Jan. 1 The company paid \(6,000 cash for 12 months of insurance coverage beginning immediately for

the calendar year.

Aug. 1 The company received \)2,400 cash in advance for 6 months of contracted services beginning

on August 1 and ending on January 31.

Dec. 31 The company prepared any necessary year-end adjusting entries related to insurance coverage

and services rendered.

a. Record journal entries for these transactions assuming Garcia follows the usual practice of recording a

prepayment of an expense in an asset account andrecording a prepayment of revenue received in a

liability account.

b. Record journal entries for these transactions assuming Garcia follows the alternative practice of recording

a prepayment of an expense in an expense account andrecording a prepayment of revenue

received in a revenue account
See all solutions

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