Moore Company Has the Following Partial List of Account Balances

question 70

Essay

Moore Company has the following partial list of account balances at year-end December 31, 2014: $$\begin{array} { l r } \text { Accounts payable } & \$ 1,800 \\\text { Accounts receivable } & 4,600 \\\text { Cost of goods sold } & 15,000 \\\text { Cash } & 23,000 \\\text { Taxes payable } & 10,000 \\\text { Land } & 25,000 \\\text { Notes payable (due in } 6 \text { months) } & 1,000 \\\text { Salaries payable } & 900 \\\text { Inventory } & 4,300\end{array}$$ Additional information: The accounts payable balance at the end of the prior year was $3,000.
Required:
(All answers are for December 31, 2014.)
A. Determine the following items:
1. Current assets
2. Current liabilities
3. Working capital
4. Accounts payable turnover ratio
5. Average age of accounts payable
B. Assume that cash is used at December 31, 2014 to pay the entire balance of accounts payable. Determine the revised amounts from part (A) above for the following items:
1. Current assets
2. Current liabilities
3. Working capital
4. Accounts payable turnover ratio
5. Average age of accounts payable
C. Comment on the effect of paying accounts payable at year-end with regard to working capital and accounts payable management.

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Definitions:

Administrative Expenses

Overhead or general expenses related to the day-to-day operations of a business, which do not directly contribute to the production of goods or services.

Interest Expense

The cost incurred by an entity for borrowed funds, typically reported as a non-operating expense on the income statement.

Chart of Accounts

A structured list of all the accounts used in the general ledger of an organization, categorized into assets, liabilities, equity, revenue, and expenses.

Merchandising Business

A type of business that purchases goods at wholesale prices and sells them at retail prices to earn a profit.