Acme Auto Supplies Balance Sheet December 31, 2017 Cash $ 60,000 Accounts Payabl

Question

Acme Auto Supplies

Balance Sheet

December 31, 2017

      Cash                         $    60,000            Accounts Payable                   $ 65,000

      Prepaid Insurance          40,000            Salaries Payable                          10,000

      Accounts Receivable      50,000            Mortgage Payable                     90,000

      Inventory                      70,000            Total Liabilities                      $165,000

      Land held for investment 80,000           

      Land                              95,000                                               

      Building                     $100,000            Common Stock $120,000

    Less Accumulated                                Retained Earnings                   250,000

     Depreciation               (30,000)                                                                                                      70,000                                                Total stockholders’ equity      $370,000

      Trademark                      70,000                 Total Liabilities and

      Total Assets               $535,000                   Stockholders’ Equity        $535,000

The current ratio is

a.   1.86: 1.

b.   2.00: 1.

c.   3.38: 1.

d.   2.93: 1.

Explanation / Answer

d. 2.93: 1

Current ratio = Current assets / Current liabilities

Current ratio = ($60,000 + $40,000 + $50,000 + $70,000) / ($65,000 + $10,000)

Current ratio = $220,000 / $75,000

Current ratio = 2.93: 1

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