Question

What should be the formula in B13?

	A	B
1		2017
2	Cash	62,000
3	Accounts Receivable	348,000
4	Inventory	728,000
5	Plant and Equipment	629,000
6	Accumulated Depreciation	149,000
7	Accounts Payable	157,000
8	Notes Payable	263,000
9	Other Current Liabilities	166,000
10	Long-term Debt	423,000
11	Common Stock	414,000
12	Retained Earnings	195,000
13	Current Ratio	?

Group of answer choices

=SUM(B2:B4)/(B7+B9)

=SUM(B2:B4)/SUM(B7:B9)

=(B1+B2)/(B6+B7+B8)   

=(B4-B4)/(B6+B7+B8)

=SUM(B2:B5)/(B6+B8+B9)

Answer 1

To answer this question we need to understand formula for the calculation of Current Ratio:

Current ratio = Current assets / Current Liabilities

From the information given in the above question:

Current assets:

Cash = 62,000 = B2

Inventory = 728,000 = B3

Accounts Receivables = 348,000 = B4

Total Current Assets = (62,000 + 728,000 + 348,000) or SUM(B2:B4)

Current Liabilities:

Accounts Payable = 157,000 = B7

Notes Payable = 263,000 = B8

Other Current Liabilities = 166,000 = B9

Total Current liabilities = (157,000 + 263,000 + 166,000) or SUM(B7:B9)

Therefore, Current ratio = (62,000 + 728,000 + 348,000) / ( 157,000 + 263,000 + 166,000) or it can be written as

Current ratio = SUM(B2:B4) / SUM(B7:B9)

Hence, Option (b) is correct from the given group of choices.