Question

Pritchett Co. reported the following year-end data: Cash $ 20,000 Short-term investments $ 8,400 Accounts receivable...

Pritchett Co. reported the following year-end data: Cash $ 20,000 Short-term investments $ 8,400 Accounts receivable (current) $ 14,800 Inventory $ 17,600 Other current assets $ 6,700 Total current liabilities $ 27,000 Compute the (a) current ratio and (b) acid-test ratio.

Compute the acid-test ratio.

Compute the current ratio.
Current Ratio
Choose Numerator: / Choose Denominator: = Current Ratio
/ = Current ratio
/ = to 1
Acid-Test Ratio
Choose Numerator: / Choose Denominator: = Acid-Test Ratio
+ + / = Acid-test ratio
+ + / = to 1
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Homework Answers

Answer #1

Ans:

1. Current Ratio: Current Asset / Current Liabilities

Cash : $20,000

Short term investment : $8,400

Account receivable : $14,800

Inventory : $17,600

Other current assets : $6,700

Current Assets : $20,000 + $8,400 + $14,800 + $17,600 + 6,700 = $67,500

Current Liability : $27,000

Current Ratio : $67,500 / $27,000 = 2.5

b.

Acid Test Ratio :

(Current Asset - Inventory) / Current liabilty:

($67,500 - $17,600) / $27,000 = 1.85

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