Final answer:
By calculating the current assets using the current ratio and then deducting the quick assets from the current assets, we find that the dollar amount of merchandise inventory for Romeo's Auto Group is $28,800.
So, the correct answer is A) $28,800.
Step-by-step explanation:
The current ratio is calculated by dividing current assets by current liabilities. Romeo's Auto Group has a current ratio of 2.65 and current liabilities of $45,000. This means the current assets are 2.65 times the current liabilities, so:
Current Assets = Current Liabilities * Current Ratio
Current Assets = 45,000 * 2.65 = $119,250
The acid test ratio (also known as the quick ratio) is calculated by subtracting inventory from current assets and then dividing by current liabilities. With an acid test ratio of 2.01, we can calculate:
Quick Assets = Current Liabilities * Acid Test Ratio
Quick Assets = 45,000 * 2.01 = $90,450
Since Quick Assets = Current Assets - Inventory, we can solve for Inventory:
Inventory = Current Assets - Quick Assets
Inventory = $119,250 - $90,450 = $28,800
Therefore, the dollar now of merchandise inventory is $28,800, which corresponds to option A.
Complete question:
Romeo's Auto Group has a current ratio of 2,65. The acid test ratio is 2.01. The current liabilities of the company are $45,000. Assuming there are no prepaid expenses, the dollar now of merchandise inventory is
A. $28,800
B. $90,450.
C. $90,540.
D. $28,008.