21) The Bedford Corporation reported the following income statement and balance

Question

21) The Bedford Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year End of prior End of current vear ear Net sales revenue (all credit) Cost of goods sold Gross profit Selling/general expenses Interest expense Net Income $1,220,000 $725,000 $495,000 $280,000 $42,000 $173,000 Current assets Long-term assets Total assets Currentliabilities Long-term liabilities Common stockholders' equity Total liabilities and stockholders' equity $113,000 $512,000 $625,000 $57,000 $275,000 $%293,000 $625,000 $82,000 $440,000 $522,000 $52,000 $245,000 $225,000 $522,000 Inventory and prepaid expenses account for $30,000 of the current year's current assets Average inventory for the current year is $36,250 Average net accounts receivable for the current year is $45,000 There are 35,000 shares of common stock outstanding Total dividends paid during the current year were $17,000 The market price per share of common stock is $20 What is the acid-test ratio for the current year? A) 8.46 B) 1.46 C) 0.53 D) 1.98

Explanation / Answer

Acid test ratio = (current assets-inventory-prepaid expenses)/current liabilities

= (113000-30000)/57000

Acid test ratio = 1.46

So answer is b) 1.46

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