Question

For the FY 2018, Dorchester Company's balance sheet included the following current items: cash $51,000, accounts...

For the FY 2018, Dorchester Company's balance sheet included the following current items: cash $51,000, accounts receivable $100,000, inventories $114,000, prepaid expenses $21,000, accounts payable $60,000, and accrued expenses $60,000.  Use this information to determine the Current Ratio. (Round & enter your answers to one decimal place.)

Homework Answers

Answer #1

Solution:

The current ratio known as working capital ratio shows the capability of a business to meet its short-term liabilities within one year.

In the given Question -

Current Assets

=

Cash + Accounts receivable + Inventories + Prepaid Expenses

=

1,000 + 1,00,000 + 1,14,000 + 21,000

=

2,36,000

Current Liabilities

=

Accounts Payable + Accrued Expenses

=

60,000 + 60,000

=

1,20,000

The formula to calculate Current Assets is

=

Current Assets

Current Liabilities

=

2,36,000

1,20,000

=

1.97

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