This Tutorial contains Excel File which can be used to solve for any values
Brief Exercise 24-8
Answer each of the questions in the following unrelated situations
a) The current ratio of a company is 5:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $485,500, what is the amount of current liabilities?
b) A company had an average inventory last year of $196,000 and its inventory turnover was 5. If sales volume and unit cost remain the same this year as last inventory turnover is 8 this year, what will average inventory have to be during the current year?
c) A company has a current assest of $89,000 (of which $42,000 is inventory and prepaid items) and current liabilities of $42,000. What is the current ratio? What is the acid-test ratio? If the company borrows $14,000 cash from bank on a 120 day loan, what will its current ratio be? What will the acid test ratio be?
d) A company has a current assest of $570,000 and current liabilities of $250,000. The board of directors declares a cash dividend of $196,000.What is the current ratio? what is the current ratio after the declaration but before payment? What is the current ratio after payment of the dividend?