The Seabury Corporation has a current ratio of 3.5 and an acid-test ratio of 2.8. The corporation's current assets consist of cash, marketable securities, accounts receivable, and inventories. Inventory equals $49,000. Seabury Corporation's current liabilities must be: (Round your intermediate calculations to 1 decimal place.) Garrison 16e Rechecks 2017-10-04
A) $70,000
B) $100,000
C) $49,000
D) $125,000

Question

Quizplus · Accepted Answer

Current ratio = Current assets / Current liabilities
3.5 = (Cash + Marketable securities + Accounts receivable + Inventory) / Current liabilities

Acid-test ratio = (Current assets - Inventory) / Current liabilities
2.8 = (Cash + Marketable securities + Accounts receivable) / Current liabilities

Substituting the value of inventory:
2.8 = (Cash + Marketable securities + Accounts receivable) / (3.5 * Current liabilities / 4.8)

Simplifying, we get:
Current liabilities = (Cash + Marketable securities + Accounts receivable + Inventory) / 3.5
Current liabilities = ($49,000 + 2.8 * Current liabilities) / 3.5

Solving for Current liabilities:
3.5 * Current liabilities = $49,000 + 2.8 * Current liabilities
0.7 * Current liabilities = $49,000
Current liabilities = $70,000

Therefore, the best choice is A) $70,000 as it is the calculated value of current liabilities based on the given information.

The Seabury Corporation Has a Current Ratio of 3