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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

What are the steps in recording closing entries?

Question:Prepare year-end adjusting journal entries for M&R Company as of December 31, 2017, for each of the

following separate cases. (Entries can draw from the following partial chart of accounts: Cash; Accounts

Receivable; Interest Receivable; Equipment; Wages Payable; Salary Payable; Interest Payable; Lawn

Services Payable; Unearned Revenue; Revenue; Interest Revenue; Wages Expense; Salary Expense;

Supplies Expense; Lawn Services Expense; Interest Expense.)

a. M&R Company provided \(2,000 in services to customers that are expected to pay the company sometime

in January following the company’s year-end.

b. Wage expenses of \)1,000 have been incurred but are not paid as of December 31.

c. M&R Company has a \(5,000 bank loan and has incurred (but not recorded) 8% interest expense of

\)400 for the year ended December 31. The company will pay the \(400 interest in cash on January 2

following the company’s year-end.

d. M&R Company hired a firm to provide lawn services at a monthly fee of \)500 with payment occurring

on the 15th of the following month. Payment for December services will occur on January 15

following the company’s year-end.

e. M&R Company has earned \(200 in interest revenue from investments for the year ended December

31. The interest revenue will be received on January 15 following the company’s year-end.

f. Salary expenses of \)900 have been earned by supervisors but not paid as of December 31.

Prepare adjusting journal entries for the year ended (date of) December 31, 2017, for each of these separate situations.

(Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Supplies;

Prepaid Insurance; Equipment; Accumulated Depreciation—Equipment; Wages Payable; Unearned Revenue;

Revenue; Wages Expense; Supplies Expense; Insurance Expense; Depreciation Expense—Equipment.)

a. Depreciation on the company’s equipment for 2017 is computed to be \(18,000.

b. The Prepaid Insurance account had a \)6,000 debit balance at December 31, 2017, before adjusting for

the costs of any expired coverage. An analysis of the company’s insurance policies showed that \(1,100

of unexpired insurance coverage remains.

c. The Office Supplies account had a \)700 debit balance on December 31, 2016; and \(3,480 of office

supplies were purchased during the year. The December 31, 2017, physical count showed \)300 of supplies

available.

d. Two-thirds of the work related to \(15,000 of cash received in advance was performed this period.

e. The Prepaid Insurance account had a \)6,800 debit balance at December 31, 2017, before adjusting for the

costs of any expired coverage. An analysis of insurance policies showed that \(5,800 of coverage had expired.

f. Wage expenses of \)3,200 have been incurred but are not paid as of December 31, 2017.

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 E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

19. Land (used in operations)

Adjusting entries affect at least one balance sheet account and at least one income statement account.

For the entries below, identify the account to be debited and the account to be credited from the following

accounts: Cash; Accounts Receivable; Prepaid Insurance; Equipment; Accumulated

Depreciation; Wages Payable; Unearned Revenue; Revenue; Wages Expense; Insurance Expense;

Depreciation Expense. Indicate which of the accounts is the income statement account and which is

the balance sheet account.

a. Entry to record revenue earned that was previously received as cash in advance.

b. Entry to record wage expenses incurred but not yet paid (nor recorded).

c. Entry to record revenue earned but not yet billed (nor recorded).

d. Entry to record expiration of prepaid insurance.

e. Entry to record annual depreciation expense.

See all solutions

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