Given the following information, determine Taylor Company's cash balance. Sales = $10,000,000 (all on credit)
Current ratio = 3.0
Current liabilities = $800,000
Average collection period = 36.5 days (Assume 365 days/year)
Quick ratio = 1.50
Current assets = cash + accounts receivable + inventory
A) $200,000
B) $1,400,000
C) $2,400,000
D) $500,000

Question

Quizplus · Accepted Answer

The current assets are $2,400,000 (current liabilities * current ratio). The quick assets (cash + accounts receivable) are $1,200,000 (current liabilities * quick ratio). The accounts receivable is $1,000,000 (sales/365 * average collection period). Therefore, cash is $200,000 ($1,200,000 - $1,000,000).

Given the Following Information, Determine Taylor Company's Cash Balance