Question

Burt's TVs has current liabilities of $26 million. Cash makes up 50 percent of the current assets and accounts receivable makes up another 30 percent of current assets. Burt's current ratio = .95 times. What is the value of inventory listed on the firm's balance sheet? (Do not round intermediate steps.)

O $13 m

O $20 m

O $4.94 m

O $7.41 m

Answer 1

$4.94 million

Step-by-step explanation:

As we know that

Current ratio = Total Current assets ÷ total current liabilities

0.95 times = Total current assets ÷ $26 million

So, the total current assets would be

= $24.7 million

So, the value of inventory would be

= (One - current assets percentage - account receivable percentage) × current assets

= (1 - 50% - 30%) × $24.7 million

= 0.20 × $24.7 million

= $4.94 million