Question & Answer: For the FY 2016, Alpha Company's balance sheet included the following current items: cash $50,000,…..

For the FY 2016, Alpha Company’s balance sheet included the following current items: cash $50,000, accounts receivable $170,000, inventories $100,000, prepaid expenses $25,000, accounts payable $90,000, and accrued expenses $70,000. Use this information to determine the: (Round & enter your answers to one decimal place for non-dollar ratios and enter the value. For dollar ratio enter as whole dollars only.)

1. Quick Ratio

2. Current Ratio

2. Working Capita

Expert Answer

 

Total current assets=(Cash+AR+Inventories+Prepaid expenses)

=($50,000+$170,000+$100,000+$25000)=$345000

Total current liabilities=(Accounts payable+Accrued expenses)

=($90,000+$70,000)=$160,000

2.Current ratio=Current assets/Current liabilities

=($345000-$160,000)=2.15625.

=2.2(Approx).

3.Working capital=Current assets-Current liabilities

=($345000-$160,000)=$185000

1.Quick ratio=(Current assets-Inventory-Prepaid expenses)/Current liabilities

=($345000-100,000-25000)/160,000

=1.375.

=1.4(Approx).

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