21.2 Balanced Books Bookkeeping
Jessica and David are student interns at Balanced Books Bookkeeping. They have taken several
business math and accounting classes and are now applying what they have learned to real-life situ-
ations. They enjoy their internship, but they are sometimes surprised by the assignments they are
given. Luckily, they work together, so they share the assignments and learn from each other. Their
most recent assignment is to take a listing of accounts provided by one of Balanced Books clients
and turn them into a balance sheet and income statement. David suggests that their client might ap-
preciate it if they also performed a vertical analysis of each statement. Jessica suggests that they
should also compute the current ratio and the acid-test ratio.
1. Create the financial statements for December 31, 2011, depict them in vertical format, and
compute the current and acid test ratios.
Account title Amount Account title Amount
Cash $4,000 Accounts payable $3,500
Depreciation 2,000 Merchandise inventory 15,000
Carlton, equity 34,500 Accounts receivable 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
Create your own Microst Excel worksheet and format it to answer your questions.
Note. Show all work and calculations. (The use of Microsoft®Excel®software is required.)
