Jessica and David are student interns at Balanced Books Bookkeeping. They have taken severalbusiness 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 aregiven. Luckily, they work together, so they share the assignments and learn from each other. Theirmost recent assignment is to take a listing of accounts provided by one of Balanced Books clientsand 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 theyshould 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 AmountCash $4,000 Accounts payable $3,500Depreciation 2,000 Merchandise inventory 15,000Carlton, equity 34,500 Accounts receivable 6,000Cost of goods sold 85,000 Net sales 120,000Rent expense 15,000 Insurance payable 500Wages payable 1,500 Equipment 15,000Utilities 6,500 Wages 8,000Misc expenses 0 1,500
