Question

Use the information below for Harding Company to answer the questions that follow.Harding Company Accounts payable: $40,000Accounts receivable: 65,000Accrued liabilities: 7,000Cash: 30,000Intangible assets: 40,000Inventory: 72,000Long-term investments: 110,000Long-term liabilities: 75,000Marketable securities: 36,000Notes payable (short-term): 30,000Property, plant, and equipment: 625,000Prepaid expenses: 2,000Based on the data for Harding Company, what is the amount of quick assets?a. $205,000 b. $203,000 c. $131,000 d. $66,000Based on the data for Harding Company, what is the amount of working capital?a. $238,000 b. $128,000 c. $168,000 d. $203,000Based on the data for Harding Company, what is the quick ratio, rounded to one decimal point?a. 2.7b. 2.6 c. 1.7 d. 0.9

Answer 1

Answer:

Quick assets = $131,000

Working capital = $128,000

Quick ratio = 1.7 times

Explanation:

The computations are shown below:

Quick assets = Cash + account receivable + marketable securities

                      = $30,000 + $65,000 + $36,000

                      = $131,000

Working capital = Current assets - current liabilities

where,

Current assets = Cash + account receivable + marketable securities + prepaid expenses + inventory

=  $30,000 + $65,000 + $36,000 + $2,000 + $72,000

= $205,000

And, the current liabilities is

=  Accounts payable + Accrued liabilities +  Notes payable (short-term)

= $40,000 + $7,000 + $30,000

= $77,000

So, the working capital is

= $205,000 - $77,000

= $128,000

Now the quick ratio

= Quick assets ÷ current liabilities

= $131,000 ÷ $77,000

= 1.7 times