The 2020 and 2021 partial balance sheets for Ottoman Industries is shown below: Calculate the 2021 acid-test ratio.
A)1.27
B)1.51
C)1.43
D)2.20

Question

The 2020 and 2021 partial balance sheets for Ottoman Industries is shown below:  Calculate the 2021 acid-test ratio.
A)1.27 
B)1.51 
C)1.43 
D)2.20

Quizplus · Accepted Answer

The acid-test ratio is calculated by dividing the sum of cash, marketable securities, and accounts receivable by current liabilities.

In 2021, the sum of cash, marketable securities, and accounts receivable is $970,000 + $870,000 + $1,060,000 = $2,900,000.

Current liabilities in 2021 are $2,030,000.

Acid-test ratio = ($2,900,000 / $2,030,000) = 1.43.

Therefore, the answer is C) 1.43.

The 2020 and 2021 Partial Balance Sheets for Ottoman Industries