The following data are taken from the balance sheet at the end of the current ye

Question

The following data are taken from the balance sheet at the end of the current year.  Determine the (a) working capital, (b) current ratio, and (c) acid-test ratio. Present figures used in your computations.  Round ratios to the nearest tenth. Remember to show calculations.

Accounts payable

$145,000

Accounts receivable

110,000

Accrued liabilities

4,000

Cash

80,000

Income tax payable

10,000

Inventory

140,000

Marketable securities

250,000

Notes payable, short-term

85,000

Prepaid expenses

15,000

  

Accounts payable

     

$145,000

     

Accounts receivable

     

110,000

     

Accrued liabilities

     

4,000

     

Cash

     

80,000

     

Income tax payable

     

10,000

     

Inventory

     

140,000

     

Marketable securities

     

250,000

     

Notes payable, short-term

     

85,000

     

Prepaid expenses

     

15,000

  

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Working Capital = Current Assets - Current Liabilities

Current Assets = 110000 (Accounts Receivable) + 80000 (Cash) + 140000 (Inventory) + 250000 (Marketable Securities) + 15000 (Prepaid Expenses) = 595000

Current Liabilties = 145000 (Accounts Payable) + 4000 (Accrued Liabilties) + 10000 (Income Taxes Payable) + 85000 (Notes Payable, Short Term) = 244000

Working Capital = 595000 - 244000 = 351000

Part B:

Current Ratio = Current Assets/Current Liabilities = 595000/244000 = 2.44 times

Part C

Quick Ratio = Quick Assets/Current Liabilities = (110000 + 80000 + 250000)/244000 = 1.80 times

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.