The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable
securities,
accounts receivable, and inventories. The December 31, 2013, balance sheet revealed the following:
Answer:
Acid-test ratio = Quick assets ÷ Current liabilities = 1.20
Quick assets = Current assets – Inventories
Quick assets = Current assets – $840,000
Current assets ÷ Current liabilities = 2.25
Current assets – $840,000 ÷ Current liabilities = 1.20
$840,000 ÷ Current liabilities = 1.05
Current liabilities = $800,000
Current assets ÷ $800,000 = 2.25
Current assets = $1,800,000