Vista IncHad the Following Balances in Selected Accounts at the End

question 104

Essay

Vista Inc.had the following balances in selected accounts at the end of 2016 and 2017.
The accounts receivable at the end of 2015 were $50,000 and the allowance for uncollectible accounts was $2,500.
Required:
a.Calculate the acid test ratio for 2016 and 2017 for Vista Inc.
b.Calculate the days' sales in receivables for 2016 and 2017 for Vista Inc.
c.Determine whether the acid-test ratio improved or deteriorated from 2016 to 2017.
d.Determine whether the collection period increased or decreased from 2016 to 2017.

---

Definitions:

Variable Costing Income Statement

An income statement format that deducts only variable costs from sales to compute contribution margin, followed by the deduction of fixed costs to determine net income.

Net Operating Income

The profit generated from the normal operational activities of a business, excluding other income and expenses such as interest and taxes.

Variable Costing

An accounting technique that calculates the cost of a product by considering only costs that fluctuate with the level of production, excluding fixed costs.

Absorption Costing

A costing method that includes all manufacturing costs - both variable and fixed - in the cost of a product.