Question

he condensed balance sheet and income statement for Marjoram Company are presented below. MARJORAM COMPANY Balance Sheet At December 31, 2021 Cash $ 19,000 Notes receivable (due August 15, 2022) 35,000 Accounts receivable (net) 48,400 Inventory 70,600 Property, plant, and equipment (net) 250,000 Intangible assets 12,400 Total assets $ 435,400 Current liabilities $ 108,400 Bonds payable (11%) (long-term) 100,000 Common stock 70,000 Retained earnings 157,000 Total liabilities and equity $ 435,400 MARJORAM COMPANY Income Statement For the Year ended December 31, 2021 Sales $ 704,000 Cost of goods sold 422,400 Gross profit $ 281,600 Operating expenses 166,200 Operating income $ 115,400 Interest expense 11,000 Income before income tax $ 104,400 Income tax expense 31,320 Net income $ 73,080 Required: Compute the current ratio for Marjoram Company. (Round your answer to 2 decimal places.)

Answer 1

Answer:

current ratio  for MARJORAM  = Current asset / current liabilities

                                                   =  $173,000/ $108,400

                                                    =  1.59

Explanation:

step 1 :calculate the total current asset of the company which is calculated below.

current asset

Cash                         $19,000

Note Receivable         35,000

Account Receivable    48,400

Inventory                      70,600

Total                         173,000

Note receivable is included in the current asset because its due date is less than 12 months.

step 2 : divide the current asset by the current liabilites in order to determine the current ratio