Canadian Bacon Inc. financial statements are presented in the table below. Based

Question

Canadian Bacon Inc. financial statements are presented in the table below.

Based on the information in the table, calculate the firm’s acid-test ratio (quick ratio).

Round the answers to two decimal places

Balance Sheet December 31, 2014

Income Statement, Year of 2014

Cash and marketable securities $132,000 Accounts payable $399,000 Accounts receivable $311,000 Notes payable $98,500 Inventories $512,000 Accrued expenses $89,300 Prepaid expenses $11,300 Total current liabilities $586,800 Total current assets $966,300 Long-term debt $799,400 Gross fixed assets $2,104,000 Par value and paid-in-capital $298,000 Less: accumulated depreciation $398,000 Retained Earnings $988,100 Net fixed assets $1,706,000 Common Equity 1,286,100 Total assets $2,672,300 Total liabilities and owner’s equity $2,672,300

Explanation / Answer

Solution :- Acid test ratio = Liquid assets / Current liabilities.

Liquid assets = Cash and marketable securities + Accounts receivable.

= 132000 + 311000

= $ 443000.

Current liabilities = $ 586800 (Total current liabilities)

Accordingly, Acid test ratio = 443000 / 586800

= 0.75 : 1

Conclusion :- Acid test ratio = 0.75 : 1

(Acid test ratio is also known as Quick ratio / Liquid ratio in finance subject).

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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