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7 January, 11:37

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.

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  1. 7 January, 11:40
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    (a) 1.20

    (b) 1.40

    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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