Selected balance sheet accounts for Tice Company on September 30, 2010, are as f

Question

Selected balance sheet accounts for Tice Company on September 30, 2010, are as follows:

Cash $ 32,000
Marketable securities 58,000
Accounts receivable, net 86,000
Inventory 90,000
Prepaid expenses 14,000
Total current assets $280,000
Accounts payable $137,200
Other accrued liabilities 30,800
Short-term debt 56,000
Total current liabilities $224,000



Calculate the working capital, current ratio, and acid-test ratio for Tice Company as of September 30, 2010. (Round "ratios" to 2 decimal places. Omit the "$" sign in your response.)

Working capital $58,000
Current ratio 1.25
Acid-test ratio ?

Explanation / Answer

Working capital = Current assets – current liabilities = 280,000 – 224,000 = $56,000 Current ratio = Current Assets/Current Liabilities = 280,000/224,000 = 1.25 Acid-test ratio = (Cash + Short-term investments + Current Receivables)/Current Liabilities = 32,000 + 58,000 + 86,000 /224,000 = 0.79

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