Question

Accounts payable $36,500, Accounts receivable $46,500, Capital stock $100,000, Cash $46,000, Dividends $10,000, Goodwill $47,000, Interest expense $4,000, Interest payable $3,500, Inventory $32,000, Note payable $30,000, Prepaid expenses $4,400, Property, plant & equipment $123,000, Retained earnings $46,000, Rent expense $18,000, Revenues $101,000, and Salary expense $60,000. The note payable balance is due in nine months. How much is Charlie's current ratio? (Round your answer to two decimal places.)

Answer 1

Answer:

The Charlie current ratio is 1.84 times

Explanation:

The formula to compute the current ratio is shown below:

Current Ratio = Current Assets ÷ Current liabilities

where,

Current assets = Cash + accounts receivable + inventory + prepaid expenses

= $46,000 + $46,500 + $32,000 + 4,400

= $128,900

And, the current liabilities equal to

= Accounts payable + interest payable + short term notes payable

= $36,500 + $3,500 + $30,000

= $70,000

Now put these values to the above formula

So, the ratio equal to

= $128,900 ÷ $70,000

= 1.84 times