Question

There are no preferred dividends in arrears, the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1, 2021, and there were no changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2021. Assume that preferred dividends for the current year have not been declared.At December 31, 2021, the current ratio was:_______.
A. 3,126 ÷ 696.
B. 1,500 ÷ 420.
C. 4,450 ÷ 546.
D. 3,126 ÷ 546.

Answer 1

Answer:

A. 3,126 ÷ 696.

Explanation:

If we assume that the preferred dividends for the current year have not been declared. At December 31, 2021, the current ratio was: 3,126 ÷ 696.

Which is gotten by the values: Current Assets / Current Liabilities.

In the question on Ramirez Corp, The relevant values for current assets and current liabilities will be: (Cash + Account Receivables + Inventories) / (Accounts Payable + Income Tax Payable + Miscellaneous Accrued Payable)

Therefore Current Ratio = (200,000 + 1,300,000 + 1,626,000) / ( 420,000 + 126,000 + 150,000) = 3,126 / 696