Which of the following is not a current asset ? inventory Prepaid Insurance Equi

Question

Which of the following is not a current asset ? inventory Prepaid Insurance Equipment Current asset MINUS current liabilities is the Current Ratio Net Worth Working Capital Current assets DIVIDED BY current liabilities is the Current Ratio) Net Worth Ratio Working Capital The quick ratio EXCLUDES which of the following? Accounts Receivable inventory) Cash At December 31 a company's records show the following information: The company's working capital is $60,000 $66,000 $196,000 The company's current ratio is 1.0:1 2.0:1 2.1:1

Explanation / Answer

1. Equipment is not a current asset.

2. current assets - current liabilities = working capital.

3.current assets / current liabilities = current ratio.

4. Quick ratio excludes Inventories.

5.formula for working capital = current assets - current liabilities.

here, current assets = cash + acounts receivables + inventories + prepaid insurance

=10,000 + 30,000 + 80,000 + 6,000 = 126,000

current liabilities = Acounts payable + notes payable + wage payable

= 30,000 + 25,000 + 5,000 = 60,000

Threrfore, Working capital = 126,000 - 60,000 = $66,000 is the working capital.

6. formula for current ratio = current assets / current liabilities

= 126,000 / 60,000 = 2.1 is the current ratio.

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