Current asset section of GTD balance sheet consists of cash, accounts receivable

Question

Current asset section of GTD balance sheet consists of cash, accounts receivable, and prepaid expenses. The 2016 balance sheet reported the following: cash, $1,490,000; prepaid expenses, $550,000; noncurrent assets, $2,800,000; and shareholders’ equity, $2,900,000. The current ratio at the end of the year was 2.5 and the debt to equity ratio was 1.5. Required: Determine the following 2016 amounts and ratios: (Round your "The acid-test ratio" answer to 1 decimal place.) 1. Current liabilities 2. Long-term liabilities3. Accounts receivables 4. The acid-test ratio

Explanation / Answer

Statement showing computations Particulars Amount Cash             1,490,000.00 Prepaid Expenses                 550,000.00 Non Current Assets             2,800,000.00 Total Assets excluding AR             4,840,000.00 Shareholders Equity             2,900,000.00 Debt To Equity Ratio = 1.5 Debt /Equity = 1.5 Debt = 1.5*2900,000             4,350,000.00 Total Assets = Debt + Equity             7,250,000.00 Accounts receivable = 7250,000 -4840,000             2,410,000.00 Cash             1,490,000.00 Prepaid Expenses                 550,000.00 Current Assets             4,450,000.00 Current Ratio                              2.50 CA/CL = 2.5 CL = 4450,000/2.5             1,780,000.00 Long term Liab = 4350,000 - 1780,000             2,570,000.00 Acid Test Ratio = QA/CL = 1490,000 + 2410,000/1780,000                              2.19

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