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Current Liabilities are $150,000, the Current Ratio is 3.75, Quick Ratio is 2.75. Determine the value...

Current Liabilities are $150,000, the Current Ratio is 3.75, Quick Ratio is 2.75.

Determine the value of Inventory. Round to nearest dollar. Do NOT enter dollar sign.

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Answer #1

First we will calculate the value of current assets as per below:

Current ratio = Current assets / Current liabilities

Putting the given values in the above formula, we get,

3.75 = Current assets / 150000

Current assets = 150000 * 3.75 = 562500

Now, Quick ratio is given by:

Quick ratio = Current assets - Inventories / Current liabilities

Putting the given values in the above formula, we get,

2.75 = (562500 - Inventories) / 150000

562500 - Inventories = 150000 * 2.75

562500 - Inventories = 412500

Inventories = 562500 - 412500 = 150000

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