8. value: 10.00 points Required information a. What will be the current ratio af
ID: 2652670 • Letter: 8
Question
8.
value:
10.00 points
Required information
a.
What will be the current ratio after a $889,000 cash purchase of inventory? (Round your answer to 2 decimal places.)
Current ratio to 1
References
eBook & Resources
WorksheetDifficulty: MediumLearning Objective: 12-03 Use ratios to analyze a companys risk.
Check my work
9.
value:
10.00 points
Required information
b.
What will be the current ratio after a $889,000 purchase of inventory on account? (Round your answer to 2 decimal places.)
Current ratio to 1
Explanation / Answer
Current Ratio- Current ratio is a liquidity ratio that shows a company’s ability to discharge its short term liabilities.
Current Ratio= Current Assets/ Current Liabilities
Current Assets- A current asset is a asset appearing in balance sheet and expected to be converted in cash within one year during normal course of business. It includes Cash, Accounts Receivable, Inventory, Prepaid Expense, Marketable Securities and other liquid assets.
Current Liabilities- These are the liabilities which is appearing in balance sheet and due on demand of creditor and includes other liability which are payable within one year. It includes short term debt, accounts payable, accrued liabilities
(‘8 – a ) Inventory purchased of $ 889,000 for cash.
There will be no change in current assets, as cash reduced by $ 889,000 and inventory increased by $ 889,000. Hence no effect will be on existing current ratio.
Current liability is not given hence current ratio cannot calculated.
(‘9 – b) Inventory purchased of $ 889,000 on accounts.
Current Assets= Inventory = $ 889,000
Current liability = Accounts payable= $ 889,000
Current Ratio= Current Asset/ Current Liability
Current Ratio= 1 ( 889000/889000)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.