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Financial & Managerial Accounting
Found in: Page 144
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Compute Chavez Company’s current ratio using the following information.

Accounts receivable $18,000 Long-term notes payable $21,000

Accounts payable 11,000 Office supplies. 2,800

Buildings 45,000 Prepaid insurance 3,560

Cash. 7,000 Unearned services revenue 3,000

Answer:

The current ratio is 2.24:1

See the step by step solution

Step by Step Solution

Step-by-Step Solution

Step 1: Definition of current ratio

It is used to calculate the short-term ability of the company to pay its short-term obligations.

Step 2: Calculation of the current ratio

First, we calculate the company's current assets and current liabilities to calculate the current ratio.

Now current liabilities,

After calculating current assets and current liabilities, now the current ratio is calculated,

Hence. The current ratio of the company is 2.24:1

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