A storage tank acquired at the beginning of the fiscal year at a cost of $90,000 has an estimated residual value of $12,000 and
an estimated useful life of 25 years. a. Determine the amount of annual depreciation by the straight-line method. $ b. Determine the amount of depreciation for the first and second years computed by the double-declining-balance method. Depreciation Year 1 $ Year 2 $
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The above answer can be explained as under -
Given,
Current Liabilities = $ 4,590
Net working capital = $ 2,170
So, the current assets will be calculated as under -
Net working capital = Current assets - Current liabilities
$ 2,170 = Current assets - $ 4,590
Current assets = $ 2,170 + $ 4,590
Current assets = $ 6,760
The liquid or quick assets will be calculated as -
Current assets - Inventory = Quick assets
Quick assets = $ 6,760 - $ 3,860
Quick assets = $ 2,900.
Now,
1. Current ratio =
Current ratio = = 1.47
2. Quick ratio =
Quick ratio = = 0.63