Question

Refer to the Zumba Corporation data above. Compute the current ratio: Then compute the quick ratio

.51
1.20
1.98
.98
The balance sheet at December 31, 20X1 for Zumba Corporation (in thousands of dollars) follows:
Current Assets:
Cash and Cash Equivalents$ 2
Accounts Receivable, net 4,800
Inventories 2,200
Prepaid Rent 898
Total Current Assets 7,900
Land, Buildings and Equipment, net 7,400
Investments 500
Total Assets $15,800
Current Liabilities:
Accounts Payable $ 500
Current Portion Long-Term Debt 2,500
Accrued Salaries Payable 1,000
Total Current Liabilities 4,000
Long-Term Debt 8,000
Total Liabilities 12,000
Stockholders' Equity:
Common Stock 2,800
Retained Earnings 1,000
Total Stockholders' Equity 3,800
Total Liabilities and Stockholders' Equity $15,800
Additional information follows:
* Net income for the year ended December 31, 20X1 is $2,020.
* Cost of goods sold for the year ended December 31, 20X1 is $4,400.
* Accounts Receivable, net on January 1, 20X1 are $4,400.
* Total assets on January 1, 2X17 are $20,000.
* Net credit sales for the year ended December 31, 20X1 are $14,600.

Answer 1

B) 1.20

Step-by-step explanation:

To find the current ratio we will divide current assets with current liabilities and find the quick ratio we just need to deduct inventory and prepaid expense from current assets in the same current ratio formula.

Data

Current assets = $7,900

Prepaid rent = $898

Inventory = $2,200

Current liabilities = $4,000

Solution

Current ratio = current asset/curremy liability

Current ratio = $7900/$4000

Current ratio = 1.975

Quick ratio = current asset - Inventories -prepaid rent / current liability

Quick ratio=$7,900-$2,200-$898/$4,000

Quick ratio = 1.20