Question

The current asset section of Bin Company's balance sheet consists of cash, marketable securities, accounts receivable, and inventories. The December 31, 2024, balance sheet revealed the following:

Inventories
Total assets
Current ratio
Acid-test ratio
$ 750.000
$2,800,000
2.3
1.05
What amount should be included in the noncurrent asset section of Bin's December 31, 2024, balance sheet

Answer 1

the amount to be included in the noncurrent asset section of Bin Company's December 31, 2024, balance sheet is approximately
`\$1,420,000.`

the calculation into detailed steps:

### Step 1: Understanding the Formulas

1. Current Ratio:

`\[ \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} \]`

2. Acid-Test Ratio (or Quick Ratio):

`\[ \text{Acid-Test Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}} \]`

Where Quick Assets = Current Assets - Inventories.

Step 2: Setting Up the Equations

From the Acid-Test Ratio, we have:

`\[ 1.05 = \frac{\text{Current Assets} - 750,000}{\text{Current Liabilities}} \]`

And from the Current Ratio, we have:

`\[ 2.3 = \frac{\text{Current Assets}}{\text{Current Liabilities}} \]`

Step 3: Solving for Current Liabilities

From the Current Ratio, we can express Current Assets in terms of Current Liabilities:

`\[ \text{Current Assets} = 2.3 * \text{Current Liabilities} \]`

Substituting this into the Acid-Test Ratio equation:

`\[ 1.05 = \frac{2.3 * \text{Current Liabilities} - 750,000}{\text{Current Liabilities}} \]`

Rearranging this equation gives us:

`\[ 1.05 * \text{Current Liabilities} = 2.3 * \text{Current Liabilities} - 750,000 \]`

Solving for Current Liabilities:

`\[ \text{Current Liabilities} = (750,000)/(2.3 - 1.05) \]`

Step 4: Finding Current Assets

Once we have Current Liabilities, we can find Current Assets using the Current Ratio:

`\[ \text{Current Assets} = 2.3 * \text{Current Liabilities} \]`

Step 5: Calculating Noncurrent Assets

Finally, Noncurrent Assets are calculated by subtracting Current Assets from Total Assets:

`\[ \text{Noncurrent Assets} = \text{Total Assets} - \text{Current Assets} \]`

Let's perform these calculations.

Here are the detailed step-wise calculations:

Step 3: Solving for Current Liabilities

`\[ \text{Current Liabilities} = (750,000)/(2.3 - 1.05) \approx \$600,000 \]`

Step 4: Finding Current Assets

Using the Current Ratio:

`\text{Current Assets} = 2.3 * \$600,000 \approx \$1,380,000`

Step 5: Calculating Noncurrent Assets

Subtracting Current Assets from Total Assets:

`\[ \text{Noncurrent Assets} = \$2,800,000 - \$1,380,000 \approx \$1,420,000 \]`

Therefore, the amount to be included in the noncurrent asset section of Bin Company's December 31, 2024, balance sheet is approximately
`\$1,420,000.`