Question

Lisa Company has Cash of 800, Accounts Receivable of 750, Office Supplies of 500, and Plant Assets of 2,000. Lisa owes 390 on Accounts Payable and Salaries Payable of 600. Calculate the current ratio.

Answer 1

The current ratio for Lisa Company is approximately 2.07, indicating that the company has $2.07 in current assets for every dollar of current liabilities.

Step-by-step explanation:

To calculate the current ratio for Lisa Company, we use the formula:

Current Ratio = Current Assets / Current Liabilities

Lisa Company's current assets are her Cash, Accounts Receivable, and Office Supplies, totalling:

• Cash: $800
• Accounts Receivable: $750
• Office Supplies: $500

So, Current Assets = 800 + 750 + 500 = $2,050.

The current liabilities are Accounts Payable and Salaries Payable, which sum up to:

• Accounts Payable: $390
• Salaries Payable: $600

As such, Current Liabilities = 390 + 600 = $990.

Therefore:

Current Ratio = $2,050 / $990 ≈ 2.07

This ratio indicates that for every dollar of current liability, Lisa Company has approximately $2.07 in current assets.