Question

Wanda Co. had Total Assets of $35,000, which included Cash of $20,000, Accounts Receivable of $5,000 Merchandise Inventory of $10,000. Wanda also had Total Liabilities of $95,000, which included Current Liabilities of $20,000. Wanda's acid-test ratio equals ____ .

Answer 1

1.25, 1.25:1, or 1.25 to 1

Step-by-step explanation:

All are correct

$20,000 + $5,000/$20,000 = 1.25

Answer 2

1.25 times

Step-by-step explanation:

The computation of the acid test ratio is shown below:

Acid test ratio = Quick assets ÷ total current liabilities

where,

Quick assets = Cash balance + Accounts Receivable

= $20,000 + $5,000

= $25,000

And, the current liabilities is $20,000

Now place these values in the formula above. So the ratio would be equal to

= $25,000 ÷ $20,000

= 1.25 times