Based on the information in Table 4-2, the acid-test ratio is a. 1.16. b. 1.33.

Question

Based on the information in Table 4-2, the acid-test ratio is

a. 1.16.
b. 1.33.
c. 2.15.
d. 1.39.

Balance Sheet ssets: $400,000 1,415,000 1,847,500 Cash and marketable securities ccounts receivable Inventories Prepaidl expenses Total current assets Fixed assets 24,000 3,686,5 2,800,000 Less: accum, depr.(1,087,500) Net fixed assets Total assets $5,399,000 Liabilities $600,000 ccounts pavable Notes payable Accrued taxes Total current liabilities 875 92,000 $1,567,000 ng-term debt Common Stock (100,000 shares) Retained Eanings Total liabilities and owner's equity 900,000 700,000 2,232,000 $5,399,000 Net sales (all credit) Less: Cost of goods sold Selling and administrative expense Depreciation expense Interest expense Earnings before taxes Income taxes Net income $6,375,000 (4,375,000) (1,000,000) (135,000) (100,000) $765,000 (306,000) $459,000

Explanation / Answer

Answer :- a. 1.16

Acid-Test Ratio = ( Cash + Account Receivable + Short-Term Investment) / Current Liabilities

= (400000 + 1415000 + 0 ) / 1567000

= ( 1815000 ) / 1567000

= 1.15826

= 1.16

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