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16 February, 07:35

Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio:

Cash $39,970

Short-term investments 9,200

Accounts receivable 40,500

Inventory 241,000

Prepaid expenses 16,830

Accounts payable 87,900

Other current payables 22,600

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Answers (1)
  1. 16 February, 11:23
    0
    The Current ratio is 3.14 and Acid test ratio is 0.81

    Explanation:

    The formula of current ratio is:

    Current Ratio = Current Assets / Current Liabilities

    = (Cash + Short term investment + Accounts receivable + Inventory + Prepaid expenses) / (Accounts Payable + Other current payables)

    = ($39,970 + $9,200 + $40,500 + $241,000 + $16,830) / ($87,900 + $ 22,600)

    = $347,500 / $110,500

    = 3.14

    The formula of Acid-Test is:

    Acid-Test Ratio = Quick Assets / Current Liabilities

    = (Cash + Short term investment + Accounts receivable) / (Accounts Payable + Other current payables)

    = ($39,970 + $9,200 + $40,500) / ($87,900 + $ 22,600)

    = $89,670 / $110,500

    = 0.81
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Home » Business » Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio: Cash $39,970 Short-term investments 9,200 Accounts receivable 40,500 Inventory 241,000 Prepaid expenses 16,830 Accounts payable 87,900 Other
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