On 31 May 2018 Creature Comforts Ltd Purchases Gas Heaters

question 63

Multiple Choice

On 31 May 2018 Creature Comforts Ltd purchases gas heaters from their supplier and agrees to pay for them within 45 days. Assuming the amount is still owing at 30 June 2018, the balance sheet of Creature Comforts Ltd will report the amount owing as:

• A) accounts payable.
• B) accounts receivable.
• C) cash at bank.
• D) debtors.

Understand the calculation and significance of key financial ratios including the quick ratio (acid-test ratio) and gross margin ratio.

Recognize the terms and implications of credit sales terms like 2/10, n/30.

Identify the components of the operating cycle for a merchandiser.

Understand the impact of new revenue recognition rules on financial statements.

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Definitions:

Tax-Deferred

Taxes are paid at the time the money is withdrawn from the account, not when the money is actually earned.

Social Security Benefits

Payments made to eligible individuals (retirees, disabled workers, and their families) from the Social Security program, funded by Social Security taxes.

Need-Based

A criteria or qualification that is determined by the applicant's financial need or income level, often used for financial aid or grants.

Mortality Rate

A measure of the number of deaths in a particular population, scaled to the size of that population, per unit of time.