Question

Accounts receivable $ 18,000 Long-term notes payable $ 21,000 Accounts payable 11,000 Office supplies 2,800 Buildings 45,000 Prepaid insurance 3,560 Cash 7,000 Unearned services revenue 3,000 Compute Chavez Company's current ratio using the above information.

Answer 1

To calculate Chavez Company's current ratio, divide the company's current assets by its current liabilities. The current ratio is 2.24.

Step-by-step explanation:

To calculate the current ratio, you need to divide the company's current assets by its current liabilities. In this case, the current assets are Accounts receivable ($18,000), Office supplies ($2,800), Prepaid insurance ($3,560), and Cash ($7,000). The current liabilities are Accounts payable ($11,000) and Unearned services revenue ($3,000). Adding up the current assets, you get $31,360. Adding up the current liabilities, you get $14,000. Therefore, the current ratio is 31,360 / 14,000 = 2.24.

Answer 2

Answer: 2.24

Step-by-step explanation:

Current ratio = Current Assets / Current liabilities

Current assets = Accounts receivable + Office supplies + Prepaid insurance + Cash

= 18,000 + 2,800 + 3,560 + 7,000

= $31,360

Current liabilities:

= Accounts payable + Unearned service revenue

= 11,000 + 3,000

= $14,000

Current ratio = 31,360 / 14,000

= 2.24