Question

The following data are taken from the balance sheet at the end of the current year....

The following data are taken from the balance sheet at the end of the current year. Determine the (a) working capital, (b) current ratio, and (c) quick/acid-test ratio. Present figures used in your computations. Round ratios to the nearest tenth.

Accounts payable

$145,000

Accounts receivable

110,000

Accrued liabilities

4,000

Cash

80,000

Income tax payable

10,000

Inventory

140,000

Marketable securities

250,000

Notes payable, short-term

85,000

Prepaid expenses

15,000

Homework Answers

Answer #1

Answer:

a. Working capital = Total current assets - Total current liabilities = $595,000 - $244,000 = $351,000

b, Current ratio = Total current assets ÷ Total current liabilities = $595,000 ÷ $244,000 = 2

c. Quick ratio = Total quick assets ÷ Total current liabilities = $440,000 ÷ $244,000 = 1.80

Workings:

Current assets:
Cash 80,000
Marketable securities 250,000
Accounts receivable 110,000
Inventory 140,000
Prepaid expenses 15,000
Total current assets 595,000
Current liabilities:
Accounts payable 145,000
Accrued liabilities 4,000
Income tax payable 10,000
Notes payable, short-term 85,000
Total current liabilities 244,000
Quick assets:
Cash 80,000
Marketable securities 250,000
Accounts receivable 110,000
Total quick assets 440,000
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