Question

Mark Company’s balance sheet reported total assets of $754,000, which include: cash, $48,000; accounts receivable, $130,000; land, $200,000; inventory, $220,000; short-term notes receivable, $150,000; and prepaid expenses, $6,000. Total liabilities amounted to $408,000, which include: accounts payable, $230,000; short-term notes payable, $10,000; unearned revenue, $8,000; and long-term liabilities, $160,000. Compute Mark’s acid-test ratio. 2.23 1.85 2.00 1.32

Answer 1

Answer:

d) 1.32

Explanation:

The quick ratio uses only the most liquid current assets.

$quick \: ratio = \frac{cash \:and \:cash \:equivalent}{current \:liabilities}$

cash 48,000

AR 130,000

Short Term receivable 150,000

Total 328,000

Important: Sometimes it is enought by subtracting inventory from current assets

Current liabilities

account payable 230,000

short-term notes payable 10,000

unearned revenue 8,000

Total 248,000

Quick Ratio

$\frac{328,000}{248,000} = 1.322580645 = 1.32$