Question

The following amounts were reported on the December 31, 2019, balance sheet: Cash:    $ 16,000...

The following amounts were reported on the December 31, 2019, balance sheet:

Cash:    $ 16,000

Accounts receivable:    44,000

Common stock:    80,000

Wages payable:    10,000

Retained earnings:    160,000

Land:    40,000

Accounts payable:    30,000

Bonds payable:    240,000

Merchandise inventory:    60,000

Buildings and equipment, net of accumulated depreciation:    360,000

Required:

    a) Calculate working capital at December 31, 2019.

    b) Calculate the current ratio at December 31, 2019.

    c) Calculate the acid-test ratio at December 31, 2019.

Business   Accounting   
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Answer #1

Ans-

Working capital = Current Assets - Current liabilities

Current assets- A . $

Cash 16,000

Accounts receivable 44000

Merchandise stock 60,000

Total. 120,000

Current liabilities -B. $

Accounts payable 30,000

Wages payable 10,000

Total 40,000

Working capital = A-B ( 120000-40000) = 80,000$

Current ratio = Current Assets /Current liabilities

120000/40000

= 3

Acid test ratio = liquid asset / current liabilities

Liquid asset= current assets - stock- prepaid exp

120,000- 60,000= 60,000

60,000/40,000= 1.5

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