The following data are provided: December 31 2015 2014 Cash $750,000 $500,000 Ac

Question

The following data are provided: December 31 2015 2014 Cash $750,000 $500,000 Accounts receivable (net) 800,000 600,000 Inventories 1,300,000 1,100,000 Plant assets (net) 3,500,000 3,250,000 Accounts payable 550,000 400,000 Income taxes payable 100,000 50,000 Bonds payable 700,000 700,000 10% Preferred stock, $50 par 1,000,000 1,000,000 Common stock, $10 par 1,200,000 900,000 Paid-in capital in excess of par 800,000 650,000 Retained earnings 2,000,000 1,750,000 Net credit sales 6,400,000 Cost of goods sold 4,200,000 Operating expenses 1,450,000 Net income 750,000 Additional information: Depreciation included in cost of goods sold and operating expenses is $610,000. On May 1, 2015, 30,000 shares of common stock were issued. The preferred stock is cumulative.

The preferred dividends were not declared during 2015. At December 31, 2015, the acid-test ratio was

1,550 ÷ 1,080.

2,100 ÷ 800.

2,850 ÷ 650.

1,550 ÷ 650.

Explanation / Answer

Acid test ratio = 1,550/650

Acid test ratio = Cash + A/c recievable / Total current liabilities

Cash + A/c receivable = $750,000 + $800,000

Total current liabiliites = Accounts payble 550,000 + Income tax payable $100,000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

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