Question

Saved The current asset section of Stibbe Pharmaceutical Company's balance sheet included cash of $30,000 and accounts receivable of $50,000. The only other current asset is inventory. The company's current ratio is 2.5 and its acid-test ratio is 1.6. Determine the ending balance in inventory and total current liabilities. Inventory Current liabilities 3 ences

Answer 1

Acid test ratio = ( 30000 + 50000 ) / Current Liabilities 1.6 = ( 30000 + 50000 ) / Current Liabilities Solving the above we get Current Liabilities = 80000 / 1.6 Current Liabilities = $ 50000 Current Ratio = Current Assets / Current Laibilities Current Ratio = (Cash + Accounts receivable + Inventory) / Current Laibilities 2.5 = (80000 + Inventory) / 50000 Solving the above we get 80000 + Inventory = 125000 Inventory = 125000 - 80000 Inventory = $ 45000 Answer Answer Inventory ending balance Current Liabilties ending balance $ 45000 $ 50000

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