The following data represent selected information from the comparative income statement and balance sheet for Hot Rolled Corporation for the years ended December 31,2017 and 2016: •10,000 shares of common shares have been issued and outstanding since the company was established.They had a market value of $90 per share on December 31,2016,and they were selling for $91.50 on December 31,2017.
Refer to the table above.The acid-test ratio for Hot Rolled Corporation on December 31,2016,was:
A) 0.67
B) 0.57
C) 1.26
D) 1.45

Question

The following data represent selected information from the comparative income statement and balance sheet for Hot Rolled Corporation for the years ended December 31,2017 and 2016:  •10,000 shares of common shares have been issued and outstanding since the company was established.They had a market value of $90 per share on December 31,2016,and they were selling for $91.50 on December 31,2017.
Refer to the table above.The acid-test ratio for Hot Rolled Corporation on December 31,2016,was:
A) 0.67 
B) 0.57 
C) 1.26 
D) 1.45

Quizplus · Accepted Answer

To calculate acid-test ratio, we would need to use quick assets and current liabilities. Quick assets include cash, marketable securities, and accounts receivables.

On December 31, 2016:

Quick assets = $80,000 + $60,000 + $45,000 = $185,000 
Current liabilities = $275,000

Acid-test ratio = Quick assets / Current liabilities 
= $185,000 / $275,000 
= 0.67

Therefore, the acid-test ratio for Hot Rolled Corporation on December 31,2016, was 0.67, which corresponds to option B.

The Following Data Represent Selected Information from the Comparative Income