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Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio:_______. Cash $70,200 Short-term investments 12,800 Accounts receivable 49,500 Inventory 242,000 Prepaid expenses 18,000 Accounts payable 100,500 Other current payables 28,000a. 3.05 and 1.03. b. 2.91 and .97. c. 1.17 and 3.91. d. .97 and 3.05.

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ayokenny2001

Answer:

a. 3.05 and 1.03

Explanation:

The formula for current ratio is

= Current assets/Current liabilities

= (Cash + Short term investment + Accounts receivable + Inventory + Prepaid expenses) / (Accounts payable + Other current payables)

= (70,200 + 12,800 + 49,500 + 242,000 + 18,000) / (100,500 + 28,000)

= 392,500 / 128,500

= 3.05

The formula for Acid test ratio is

= Quick Assets / Current liabilities

= (Cash + Short term investment + Accounts receivable) / (Accounts payable + Other current payables)

= (70,200 + 12,800 + 49,500) / (100,500 + 28,000)

= 132,500 / 128,500

= 1.03

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