Question

Brief Exercise 24-8 Answer each of the questions in the following unrelated situations. (a) The current ratio of a company is 6:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $481,000, what is the amount of current liabilities? Current Liabilities $ (b) A company had an average inventory last year of $185,000 and its inventory turnover was 6. If sales volume and unit cost remain the same this year as last and inventory turnover is 8 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.) Average Inventory $ (c) A company has current assets of $82,000 (of which $44,000 is inventory and prepaid items) and current liabilities of $44,000. What is the current ratio? What is the acid-test ratio? If the company borrows $16,000 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be? (Round answers to 2 decimal places, e.g. 2.50.) Current Ratio :1 Acid Test Ratio :1 New Current Ratio :1 New Acid Test Ratio :1 (d) A company has current assets of $640,000 and current liabilities of $236,000. The board of directors declares a cash dividend of $190,000. What is the current ratio after the declaration but before payment? What is the current ratio after the payment of the dividend? (Round answers to 2 decimal places, e.g. 2.50.) Current ratio after the declaration but before payment :1 Current ratio after the payment of the dividend :1

Answer 1

a Given current rato - 6 1 1 1 + $481,000 = 60 st Acid-test ratio - lindi S b) Current liabilities & $481,000 YOU voor 866 1896,200 a j Average inventory for the current year i onado last year datar Average inventory = $185,000 Inventory turnover = 6 Inventory turnovee - cost of goods sold Aug inventory cost of goods sold & $185000x6 = $1,110,000 Current yeari Inventory turnover = 8.1 Average inventory – $1,110,000 => [7138,950 . 8 Current rato current Assets to current liabilities & u 4.000 a 1.86 44,000 = 1086 Acid-test = current o Inventory co Peepaid niet o o ratio iteru current liabilities $82000 -44,000 $38,000 - 1086 $ 44000 44,000 Il company borrows a short term to loan of $180 current Assets » $82,000+ $16,000 = $98,000 Current liabilites > 82 44,000 + 16000 = 60,000 New current ratio $95000 60,000 (1.63] New Acid test ratio (98,000-44,000) ? = 10090) 60,000

a 13 current ratio before payment of dividend... current ratio $640,000 & -99 - 1150 236,000+ 190,000 Current ratio after payment of dividend Current Assets $640,000 - 190,000 = $450,000 current liabilities 236,000 - Moroo = 46,000 e 191 ..current ratio $450 bro0 936,000