S 13-6 Computing current ratio and acid-test ratio LO P3 Pritchett Co. reported the following year-end...

S 13-6 Computing current ratio and acid-test ratio LO P3

Pritchett Co. reported the following year-end data:


Cash	$	26,100
Short-term investments	$	9,100
Accounts receivable (current)	$	19,400
Inventory	$	27,900
Other current assets	$	15,000
Total current liabilities	$	39,000

Compute the (a) current ratio and (b) acid-test ratio.

Solutions

Expert Solution

Correct Answer:

Current ratio	2.50 Times
Acid test ratio	1.40 Times

Working:

A	Cash	$ 26,100
B	Short-term investments	$ 9,100
C	Accounts receivable (current)	$ 19,400
D	Inventory	$ 27,900
E	Other current assets	$ 15,000
F=A+B+C+D+E	Total current assets	$ 97,500
G	Total Current Liabilities	$ 39,000
H=F/G	Current ratio	2.50

A	Cash	$ 26,100
B	Short-term investments	$ 9,100
C	Accounts receivable (current)	$ 19,400
D=A+B+C	Quick assets	$ 54,600
E	Total Current Liabilities	$ 39,000
F=D/E	Acid test ratio	1.40

End of answer.

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