Question

Lee Company has a current ratio of 2.65. The acid test ratio is 2.01. The current liabilities of Lee are $45,000. Assuming there are no prepaid expenses, the dollar amount of merchandise inventory is A. $28,800. B. $90,540. C. $28,008.D. $90,450

Answer 1

The dollar amount of merchandise inventory is A. $28,800
Let N = be the missing number
1.) N/$45,000 = 2.65/1 (cross multiply to get the current assets)
                   N = $119,250
2.) N/$45,000 = 2.01 (cross multiply to get current the quick assets)
                   N = $90,450
3.) Since there are no prepaid expenses, subtract current quick assets from the current assets to get the merchandise inventory
$119,250 - $90,450 = $28,800