Nabors Company reported the following current assets and liabilities for December 31, 2014 and 2013:

Nabors Company reported the following current assets and liabilities for December 31, 2014 and 2013:













Dec. 31, 2014 Dec. 31, 2013
Cash $ 650 $ 680
Temporary investments 1,500 1,550
Accounts receivable 700 770
Inventory 1,250 1,400
Accounts payable 2,375 2,000




a. Compute the quick ratio for December 31, 2014 and 2013.
b. Interpret the company’s quick ratio. Is the quick ratio improving or declining?


Answer:
a.
December 31, 2014
Quick Ratio = Quick Assets ÷ Current Liabilities
Quick Ratio = ($650 + $1,500 + $700) ÷ $2,375
Quick Ratio = 1.2
December 31, 2013
Quick Ratio = Quick Assets ÷ Current Liabilities
Quick Ratio = ($680 + $1,550 + $770) ÷ $2,000
Quick Ratio = 1.5

b. The quick ratio of Nabors Company has declined from 1.5 in 2013 to 1.2 in 2014. This decrease is the result of a large increase in accounts payable compared to decreases in the three types of quick assets (cash, temporary investments, and accounts receivable).







Quantas Industries sold $325,000 of consumer electronics during July under a nine-month warranty. The cost to repair defects under the warranty is estimated at 4.5% of the sales price. On November 11, a customer was given $220 cash under terms of the warranty. Provide the journal entry for (a) the estimated warranty expense on July 31 for July sales, and (b) the November 11 cash payment.


Answer:










a.
 July 31 Product Warranty Expense 14,625
Product Warranty Payable 14,625
To record warranty expense for July,
4.5% × $325,000.
b.
 Nov. 11 Product Warranty Payable 220
Cash 220