Question

Agnes Company reported the following data:

Quick assets $45,000
Current assets 140,000
Total liabilities 290,000
Average net receivables 14,600
Beginning inventory 28,000
Long-term liabilities 190,000
Net credit sales 116,000
Cost of goods sold 74,000
Ending inventory 36,000
What was the current ratio?
A 1.40
B 0.48
C 0.74
D 0.71

Answer 1

The current ratio of Agnes Company is calculated by dividing current assets by current liabilities, which are derived by subtracting long-term liabilities from total liabilities. After performing the calculation, the current ratio is found to be 1.40.

Step-by-step explanation:

To determine the current ratio of Agnes Company, we use the formula:

Current Ratio = Current Assets / Current Liabilities

The question provides the following information:

• Current Assets = $140,000
• Total Liabilities = $290,000
• Long-term Liabilities = $190,000

Since Current Liabilities are not directly given, we need to calculate them by subtracting Long-term Liabilities from Total Liabilities:

Current Liabilities = Total Liabilities - Long-term Liabilities = $290,000 - $190,000 = $100,000

Now we can compute the Current Ratio:

Current Ratio = $140,000 / $100,000 = 1.4

So, the correct answer is A: 1.40.