Davis, Managerial Accounting, 3e outstanding lome Read, Study &Practice; Gradebo

Question

Davis, Managerial Accounting, 3e outstanding lome Read, Study &Practice; Gradebook ORION Downloadable eTextbook Assignment> Open Assignment ASSIGNMENT Chapter 121 12-2 Exercise 12-8 Pharoah Medical manufactures hospital beds and other instrutional fumiture. The company's comparative balance sheet and income statement for 2015 and 2016 follow Review Resuits by Studv Current assers 387,000 $417400 Accounts receivable, net 27,000 681,100 81.350247,050 current assets 2,570,350 2,122.050 Progerty, plant, &equipment;, net 8,651,835 8439,645 85 $10,561, 3,162,000 $2,846,000 ,0,600 3,92 6,844600 6,738,600 Current labities Total liabilties Preferred stock, $5 par value $8,95058,900 3,985 3,660,295 Retained eamings 4.192,98 Total stockholders' equity 20 4 5 6 2 3

Explanation / Answer

I have computed the Current Ratio and Acid-Test Ratio which is shown as incorrect in the answer tab

(b)-Current Ratio

Current ratio        = Total Current Assets / Total Current Liabilities

                             = $25,70,350 / $31,62,000

                             = 0.81

(c) Acid Test Ratio

Acid Test Ratio = (Total Current assets – Inventory) / Total Current Liabilities

= ($25,70,350 - $7,27,000 ) / $31,62,000

= $1843350 / $3162000

= 0.58

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