Cotuit Company has a current ratio of 4.0 and an acid-test ratio of 3.1. The com
ID: 2381713 • Letter: C
Question
Cotuit Company has a current ratio of 4.0 and an acid-test ratio of 3.1. The company's current assets consist of cash, marketable securities, accounts receivable, and inventory. The company's inventory is $36,000. Cotuit Company's current liabilities must be: (Round your intermediate calculations to 1 decimal place.)
Cotuit Company has a current ratio of 4.0 and an acid-test ratio of 3.1. The company's current assets consist of cash, marketable securities, accounts receivable, and inventory. The company's inventory is $36,000. Cotuit Company's current liabilities must be: (Round your intermediate calculations to 1 decimal place.)
Explanation / Answer
acid test ration = y/x = 3.1 ..... i
here y = current assets - inventory
=> current assets = y+36,000
also (y+36000)/x = 4 ... ii
dividing ii by i
=>(y+36,000)/y = 4/3.1
=>0.9 y = 111600
=> y = 124,000
so current assets = 124,000 + 36,000 = 160,000
also 160,000/current liabilities = 4
=> current liabilities = 160,000/4 = 40,000