Ask Question
16 June, 23:21

Cash - $ 1,340 Prepaid expenses - $ 600 Accounts receivable - 2,023 Accounts payable - 5,100 Inventory - 4,300 Other current liabilities - 600 Use the above information on current assets and current liabilities to compute the acid-test ratio.

+5
Answers (1)
  1. 16 June, 23:48
    0
    The correct answer is 0.59 : 1.

    Explanation:

    According to the scenario, the given data are as follows:

    Cash = $1,340

    Prepaid expenses = $600

    Accounts receivable = $2,023

    Accounts payable = $5,100

    Inventory = $4,300

    Other current liabilities = $600

    So, we can calculate Quick ratio by using following formula:

    Acid Test Ratio = Quick Assets / Current Liabilities

    Where, Quick Assets = Cash and cash equivalents + Marketable securities + Accounts receivable

    = $1,340 + $2,023

    = $3,363

    And Current liabilities = Accounts payable + Other current liabilities

    = $5,100 + $600

    = $ 5,700

    So, by putting the value in the formula, we get,

    Acid Test Ratio = $3,363 / $5,700

    = 0.59

    Hence, the acid test ratio is 0.59 : 1
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Cash - $ 1,340 Prepaid expenses - $ 600 Accounts receivable - 2,023 Accounts payable - 5,100 Inventory - 4,300 Other current liabilities - ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers