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Darv Co. had a current ratio of 3-to-1 and a quick ratio of 1-to-1. Current liabilities were $322,000.

What was the total amount for inventory and prepaid expenses?

A.$322,000
B.$644,000
C.$966,000
D.$1,288,000

User Spfrnd
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1 Answer

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Final answer:

Darv Co. had a current ratio of 3-to-1 and a quick ratio of 1-to-1. The total amount for inventory and prepaid expenses is $644,000.

Step-by-step explanation:

The current ratio is calculated by dividing current assets by current liabilities. In this case, the current ratio is 3-to-1, which means that for every $1 of current liabilities, the company has $3 of current assets. Therefore, the total amount of current assets would be $3 * $322,000 = $966,000.

The quick ratio is calculated by subtracting inventory from current assets and dividing by current liabilities. In this case, the quick ratio is 1-to-1, which means that for every $1 of current liabilities, the company has $1 of quick assets (current assets excluding inventory). Therefore, the total amount of quick assets would also be $322,000.

Since inventory is included in the total current assets and the amount of quick assets, the amount for inventory and prepaid expenses would be $966,000 - $322,000 = $old{644,000}$.

User Uwe Plonus
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