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12 March, 11:15

Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio: Cash $54,960 Short-term investments 11,200 Accounts receivable 45,500 Inventory 234,000 Prepaid expenses 26,840 Accounts payable 94,900 Other current payables 25,600

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  1. 12 March, 11:21
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    Current ratio=3.09

    Acid test ratio=0.93

    Explanation:

    Current ratio of the Bauman LLC shall be determined through following mentioned formula:

    Current ratio=Current assets/Current liabilities

    In the given question

    Current assets=Cash+Short-term investments+Accounts receivable+Inventory+Prepaid expenses

    Current assets=$54,960 + $11,200+$45,500+$234,000+$26,840

    =$372,500

    Current liabilities=Accounts payable + Other current payables

    =$94,900+$25,600

    =$120,500

    Current ratio=$372,500/$120,500=3.09

    Acid test of the Bauman LLC shall be determined through following mentioned formula:

    Acid test=Cash+Short-term investment+Accounts receivable/Current liabilities

    In the given question

    Cash+Short-term investments+Accounts receivable

    =$54,960 + $11,200+$45,500

    =$111,660

    Current liabilities=Accounts payable + Other current payables

    =$94,900+$25,600

    =$120,500

    Acid test ratio=$111,660/$120,500=0.93
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