Question

Accounts receivable $29,500

Long-term notes payable $20,000
Accounts payable 13,500
Office supplies 4,800
Buildings 48,000
Prepaid insurance 4,680
Cash 7,900
Unearned services revenue 6,000

Required:
Compute Chavez Company's current ratio using the above information.

Answer 1

Company's current ratio is 2.4

Step-by-step explanation:

Current ratio = Current assets / Current liability

Current ratio = 46,880/19,500

Current ratio = 2.404 =2.4

WORKINGS

Current assets:

Account Receivable= 29,500

Office supplies 4,800 (Assuming they are stocks of supplies)

Prepaid insurance 4,680

Cash 7,900

Total current assets=46,880

Current liabilities

Account Payable 13,500

Unearned services revenue 6,000

Total current liability= 19,500