The financial statements for Barrington Service Company include the following items: 2019 2018 Cash $43,500 $47,000 Shortminusterm Investments 31,000 16,000 Net Accounts Receivable 62,000 56,000 Merchandise Inventory 165,000 51,000 Total Assets 525,000 544,000 Accounts Payable 126,500 130,000 Salaries Payable 24,000 16,000 Longminusterm Note Payable 61,000 51,000 Compute the current ratio for 2018.

Question

Lance Larson

Business

18 April, 22:27

The financial statements for Barrington Service Company include the following items: 2019 2018 Cash $43,500 $47,000 Shortminusterm Investments 31,000 16,000 Net Accounts Receivable 62,000 56,000 Merchandise Inventory 165,000 51,000 Total Assets 525,000 544,000 Accounts Payable 126,500 130,000 Salaries Payable 24,000 16,000 Longminusterm Note Payable 61,000 51,000 Compute the current ratio for 2018.

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Adelaide Henry · Answer 1

The Current ratio is 1.16

Explanation:

The formula to compute the current ratio is:

Current ratio = Current Assets (CA) / Current Liabilities (CL)

where

CA is computed as:

CA = Cash + Short term investment + Net Accounts Receivable + Merchandise Inventory

= $ 47,000 + $16,000 + $56,000 + $51,000

= $170,000

CL is computed as:

CL = Accounts Payable + Salary Payable

= $130,000 + $16,000

= $146,000

Putting the values in the formula:

= $170,000 / $146,000

= 1.16