At January 1, 2015, a firm had $407,500 in current assets, $500,000 in stockhold

Question

At January 1, 2015, a firm had $407,500 in current assets, $500,000 in stockholders equity, and a current ratio of 2.20. During the year, only the following transactions occurred: performed $1,340,000 of services for customers, receiving $960,000 in cash and the rest on account purchased $210,000 of land on a short-term note paid $42,800 on accounts payable recorded accrued income tax expense of $32,300 paid $1,000.000 of general expenses, of which $920,000 was for 2015 and the rest was for 2014 What is the current ratio at December 31, 2015 (rounded)? 2.31 2.04 1.97 1.85 1.68

Explanation / Answer

Answer. (a). 2.31 Current ratio = Current Assets / Current liabilities 2.20 = 407500 / Current Liabilities Current Liabilities = 185227.27 or 185227 Current Assets as on 31.12.2015 Balance as on 01.01.2015               407,500 Cash Recd from Customers               960,000 Increase in Accounts Receivables               380,000 Payment to Accounts Payables               (42,800) Paid General Expenses         (1,000,000) Current Assets as on 31.12.2015               704,700 Current Liabilities as on 31.12.2015 Balance as on 01.01.2015               185,227 Short Term Note Payable               210,000 Payment to Accounts Payables               (42,800) Accrued I Tax                  32,300 Paid General exp. For 2014               (80,000) Current Liabilities as on 31.12.2015               304,727 Current ratio at 31.12.2015 = $704700 / $304727 Current ratio at 31.12.2015 = 2.31

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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