Calculate the current ratio assuming that cash = $6,000, land = $105,000, accounts receivable = $19,000, merchandise inventory = $20,000, accounts payable = $15,000, long-term debt = $80,000, and retained earnings = $55,000. (Round your answer to one decimal place, if necessary.)Multiple choice question.0.51.72.03.0
Question
Calculate the current ratio assuming that cash = 105,000, accounts receivable = 20,000, accounts payable = 80,000, and retained earnings = $55,000. (Round your answer to one decimal place, if necessary.)Multiple choice question.0.51.72.03.0
Solution
The current ratio is calculated as current assets divided by current liabilities.
First, we need to identify the current assets and current liabilities from the given data.
Current assets typically include cash, accounts receivable, and merchandise inventory. So, in this case, current assets = cash + accounts receivable + merchandise inventory = 19,000 + 45,000.
Current liabilities typically include accounts payable. So, in this case, current liabilities = accounts payable = $15,000.
Now, we can calculate the current ratio as follows:
Current ratio = Current assets / Current liabilities = 15,000 = 3.0
So, the current ratio is 3.0.
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