MC Qu. 157 Financial statements for ... Financial statements for Maraby Corporat

Question

MC Qu. 157 Financial statements for ...

Financial statements for Maraby Corporation appear below:

Maraby Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)

Maraby Corporation
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)

Maraby Corporation's acid-test ratio at the end of Year 2 was closest to:

a. 0.51

b. 0.47

c. 1.14

d. 1.95

Maraby Corporation
Balance Sheet
December 31, Year 2 and Year 1
(dollars in thousands)

Year 2 Year 1 Current assets:     Cash and marketable securities $220 $190     Accounts receivable, net 190 160     Inventory 140 150     Prepaid expenses        70      80 Total current assets 620 580 Noncurrent assets:    Plant & equipment, net    1,180   1,150 Total assets $1,800 $1,730 Current liabilities:     Accounts payable $100 $120     Accrued liabilities 100 70     Notes payable, short term     160     160 Total current liabilities 360 350 Noncurrent liabilities:    Bonds payable      450      500 Total liabilities      810    850 Stockholders’ equity:    Common stock, $5 par 160 160    Additional paid-in capital-common stock 200 200    Retained earnings      630      520 Total stockholders’ equity     990      880 Total liabilities & stockholders’ equity $1,800 $1,730

Explanation / Answer

acid-test ratio at the end of Year 2=(Total current assets-inventory-prepaid expenses)/Current liabilities

=(620-140-70)/360

which is equal to

=1.14(Approx).

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