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Quick Ratio Gmeiner Co. had the following current assets and liabilities on December 31 of two recent years: Current Year Previous Year Current assets: Cash $ 486,000 $ 500,000 Accounts receivable 210,000 200,000 Inventory 375,000 350,000 Total current assets $1,071,000 $1,050,000 Current liabilities: Current portion of long-term debt $ 145,000 $ 110,000 Accounts payable 175,000 150,000 Accrued and other current liabilities 260,000 240,000 Total current liabilities $ 580,000 $ 500,000 a. Determine the quick ratio for December 31 of both years. If required, round your answers to one decimal place.

1 Answer

2 votes

Answer:

(a) 1.20

(b) 1.40

Step-by-step explanation:

For current year:

Quick Assets:

= cash + Accounts receivable

= $ 486,000 + $210,000

= $696,000

Therefore,

Quick Ratio = Current Assets(Quick) ÷ current Liabilities

= $696,000 ÷ $ 580,000

= 1.20

For previous year:

Quick Assets:

= cash + Accounts receivable

= $500,000 + $200,000

= $700,000

Therefore,

Quick Ratio = Current Assets(Quick) ÷ current Liabilities

= $700,000 ÷ $ 500,000

= 1.40

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