The Seabury Corporation has a current ratio of 4.2 and an acid-test ratio of 3.9. The corporation's current assets consist of cash, marketable securities, accounts receivable, and inventories. Inventory equals $18,000. Seabury Corporation's current liabilities must be: (Round your intermediate calculations to 1 decimal place.)
A) $18,000
B) $234,000
C) $60,000
D) $5,400

Question

Quizplus · Accepted Answer

To find the current liabilities of Seabury Corporation, we can use the current ratio and acid-test ratio formulas.

Current Ratio = Current Assets / Current Liabilities
4.2 = (Cash + Marketable Securities + Accounts Receivable + Inventory) / Current Liabilities

Acid-Test Ratio = (Current Assets - Inventory) / Current Liabilities
3.9 = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities

Let's solve these two equations simultaneously to find the value of Current Liabilities.

4.2 = (Cash + Marketable Securities + Accounts Receivable + Inventory) / Current Liabilities
3.9 = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities

Subtracting the second equation from the first, we get:

0.3 = Inventory / Current Liabilities

Replacing the value of Inventory with $18,000, we get:

0.3 = 18,000 / Current Liabilities

Solving for Current Liabilities, we get:

Current Liabilities = 18,000 / 0.3 = $60,000

Therefore, the best choice is C, $60,000, as this is the calculated value of Seabury Corporation's current liabilities.

The Seabury Corporation Has a Current Ratio of 4