Question

Hi, I need to find the current ratio and the acid-test ratio. I know the equations for both, but have been having difficulties with calculating the correct answer

	Unadjusted Trial Balance
Account	Debit	Credit
Cash	-350
Merch. Inv.	12,000
Store Supplies	5,900
Prepaid Ins	2,500
Store Equip	42,900
Accumulated depreciation - Store Equip.		16,250
Accounts Payable		15,000
Capital		17,000
Withdrawls	2,100
Sales		114,550
Sales Discounts	1,800
Sales Returns & Allowances	2,050
Cost of Goods Sold	38,000
Depreciation Exp. - Store Equip.	0
Salaries Exp.	30,400
Ins. Exp.	0
Rent Exp.	16,000
Store Supplies Exp.	0
Advertising Exp.	9,500
Total	162,800	162,800

Additional Info

a. Store supplies still available at fiscal year-end amount to $2,700

b. Expired ins. for the fiscal year is $1,550

c. Depreciation expense on store equip. is $1,625 for the fiscal year

d. Physical count of ending merchandise inventory shows $10,200 of inventory is still available at fiscal year-end

current ratio = current assets / current liabilities

acid-test ratio = (cash and cash equivalents + short-term investments + current receivables) / current liabilities

Answer 1

	Adjusted Trial Balance
Account	Debit	Credit
Cash	-350
Merch. Inv.	10,200
Store Supplies	2,700
Prepaid Ins	950
Store Equip	42,900
Accumulated depreciation - Store Equip.		17,875
Accounts Payable		15,000
Capital		17,000
Withdrawls	2,100
Sales		114,550
Sales Discounts	1,800
Sales Returns & Allowances	2,050
Adjusted Cost of Goods Sold	39,800
Depreciation Exp. - Store Equip.	1,625
Salaries Exp.	30,400
Ins. Exp.	1,550
Rent Exp.	16,000
Store Supplies Exp.	3,200
Advertising Exp.	9,500
Total	164,425	164,425

Adjusted Cost of Goods sold

= (Merch. Inv in unadjusted Trial - Physical count) + Cost of Goods sold in Balance Sheet

= (12,000 - 10,200) + 38,000

= 39,800

1. Current ratio

= Current assets / Current liabilities

= (cash + merch inv + store supplies + prepaid Ins + store equipment) / (accounts payable)

= (-350 + 10,200 + 2,700 + 950 + 42,900) / (15,000)

= 56,400 / 15,000

= 3.76

2.Acid-test ratio

= (cash and cash equivalents + short-term investments + current receivables) / current liabilities

= (-350) / 15,000

= -0.023