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5 April, 08:52

If the Golden Braid Bookstore has a current (or working capital) ratio of 8.25:1, $40,000 in accounts receivable, $340,000 in cash, $65,000 in accounts payable and $15,000 in other current liabilities, how much inventory do they have? a) $55,000b) $280,000c) $825,000d) $34,000

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  1. 5 April, 09:20
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    inventory 280,000

    Explanation:

    current liaiblities:

    65,000 A/P

    15,000 other current liaiblities

    total 80,000

    As the rate is 8.25:1

    There is 8.25 times as much current asset than liabilities:

    80,000 x 8.25 = 660,000 current assets

    We subtract from this the know values of current asset and solve for inventory:

    current assets 660,000

    A/R (40,000)

    cash (340,000)

    inventory 280,000
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