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The following data were taken from the comparative balance sheet of Icon Living, Inc., for the...

The following data were taken from the comparative balance sheet of Icon Living, Inc., for the years ended December 31, 20Y9 and December 31, 20Y8:

Dec. 31, 20Y9 Dec. 31, 20Y8
Cash $ 75,000 $ 50,000
Temporary investments 125,000 75,000
Accounts and notes receivable (net) 250,000 200,000
Inventories 425,000 305,000
Prepaid expenses 25,000 20,000
Total current assets $900,000 $650,000
Accounts payable $ 350,000 $ 230,000
Accrued liabilities 25,000 20,000
Total current liabilities $ 375,000 $ 250,000

a. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. Round ratios to one decimal place.

20Y9 20Y8
Working capital $fill in the blank 1 $fill in the blank 2
Current ratio fill in the blank 3 fill in the blank 4
Quick ratio fill in the blank 5 fill in the blank 6
Business   Accounting   
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Answer #1

Answer-1)- Working capital =Current assets- Current liabilities

20Y9 = $900000 - $375000 = $525000

20Y8 = $650000 - $250000 = $400000

2)- Current Ratio=Current Assets/ Current Liabilities

20Y9 = $900000/$375000 = 2.4 times

20Y8 = $650000 /$250000 = 2.6 times

3)- Acid-test (Quick ratio)= Current assets-Inventory-Prepaid expenses/Current Liabilities

20Y9 = ($900000 - $425000 - $25000)/$375000

= $450000/$375000

= 1.2 times

20Y8 = ($650000 - $305000 - $20000)/$250000

= $325000/$250000

= 1.3 times

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