Cash Temporary Investments $65,000 50,000 Accounts and notes receivable Inventor

Question

Cash Temporary Investments $65,000 50,000 Accounts and notes receivable Inventory Pre paid expenses Fixed assests (net) Accounts payable Notes payable (Short term non-interest bearing) Accured Liabilities Mortagage note payable, 5% due in 2025 Preferred 8% stock, $100 par Common Stock, $10 par Paid-in-capital in Exces of Par, Common stock Retaind earnings 110,000 140,000 10,000 900,000 125,000 100,000 25,000 250,000 100,000 400,000 50,000 225,000 Selected data related to 12 mnths of the current year reveal the following: $650,000 750,000 130,000 1,200,000 40,000 910,000 140,000 20,000 88,000 Average common stockholders' equity Average stockholders' equity Average inventory Average total assests Cash dovodends paid on common stock Cost of goods sold Income before income tax Interest expense Net Income Sales The common stock was selling for $25 per share a the end of the year. What is the acid-test/Quick ratio? 1,500,000 A) 9:1 C) 7:1

Explanation / Answer

Quick assets = Cash + Temporary investment + Accounts and notes receivable = 65,000+50,000+110,000 = $225,000

Current liabilities = Accounts payable + Notes payable (short term non interest bearing) + Accrued liabilities = 125,000+100,000+25,000 = $250,000

Acid test/Quick ratio = Quick assets ÷ Current liabilities = 225,000÷250,000 = 0.9:1

Answer is option (B)

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