Question

Accounts receivable $ 28,500 Long-term notes payable $ 23,000 Accounts payable 16,200 Office supplies 4,000 Buildings 51,000 Prepaid insurance 4,040 Cash 7,500 Unearned services revenue 3,800 Compute Chavez Company's current ratio using the above information.

Answer 1

Answer:

Chavez Company's current ratio = 2.202

Explanation:

CLASSIFYING THE BALANCE SHEET ACCOUNTS OF CHAVEZ COMPANY'S

CURRENT ASSETS – 44,040

• Cash 7,500

• Accounts receivable 28,500

• Prepaid insurance 4,040

• Office supplies 4,000

LONG-TERM ASSETS – 51,000

• Buildings 51,000

CURRENT LIABILITIES – 20,000

• Accounts payable 16,200

• Unearned services revenue 3,800

LONG-TERM LIABILITIES – 23,000

• Long-term notes payable 23,000

Current Ratio = Current Asset (CA) / Current Liabilities (CL)

Current Ratio = 44,040 / 20,000

Current Ratio = 2.202