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The current asset section of Guardian Consultant’s balance sheet consists of cash, accounts receivable, and prepaid...

The current asset section of Guardian Consultant’s balance sheet consists of cash, accounts receivable, and prepaid expenses. The 2018 balance sheet reported the following: cash, $1,350,000; prepaid expenses, $410,000; noncurrent assets, $2,900,000; and shareholders’ equity, $3,000,000. The current ratio at the end of the year was 2.6 and the debt to equity ratio was 1.7. Required: Determine the following 2018 amounts and ratios: (Round your "The acid-test ratio" answer to 1 decimal place.)

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Answer #1

Ans:

Acid test ratio=Quick assets/current liabilites

=$47,90,000/$20,00,000

=2.4

Calculations for above answer

Quick assets=cash+Accounts Recivable

Quick Assets=13,50,000+34,40,000

=47,90,000$

current liabilites=20,00,000$

Working:

1)Debt equity ratio=Total liabilites/Shareholders equity

1.7=Total liabilites/30,00,000

Total Liabilites=51,00,000$

2)Current Assets=Share holders equity+Total LIabilites-Non current Assets

30,00,000+51,00,000-29,00,000=52,00,000$

3)Current assets=cash+Accounts receivable+Prepaid expense

52,00,000=13,50,000+Accounts Receivable+4,10,000

Accounts Receivable=34,40,000$

4)Current ratio=Current Assets/Current liabilites

2.6=52,00,000/current liabilites

current liabilites=20,00,000

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