Use Rizwi Corporation's list of accounts at December 31, 2016 to answer the following question. Rizwi Corporation
List of Accounts at December 31, 2016
$\begin{array}{lrlr}
\text { Cash } & \$ 30,000 & \text { Accumulated depreciation } & \$ 12,000 \
\text { Merchandise inventory } & 14,000 &\text { Notes payable- } & 120,000 \
\text { Land } & 40,000&\text { Due12/31/2024 } & \
\text { Buildings } & 80,000&\text { Accounts payable } & 14,000 \
\text { Accounts receivable } &25,000& \text { Equipment } & 33,000 \
& & \text { Notes Payable- } & 14,000\
&&\text { Due07/01/2018 }\
\end{array}$ ? What is Rizwi Corp.'s current ratio?
A) 0.48 to 1
B) 2.00 to 1
C) 2.55 to 1
D) 2.86 to 1

Question

Use Rizwi Corporation's list of accounts at December 31, 2016 to answer the following question. Rizwi Corporation
List of Accounts at December 31, 2016
$\begin{array}{lrlr}
\text { Cash } & \$ 30,000 & \text { Accumulated depreciation } & \$ 12,000 \
\text { Merchandise inventory } & 14,000 &\text { Notes payable- } & 120,000 \
\text { Land } &  40,000&\text { Due12/31/2024 } & \
\text { Buildings } &  80,000&\text { Accounts payable } & 14,000 \
\text { Accounts receivable } &25,000& \text { Equipment } & 33,000 \
& & \text { Notes Payable- } & 14,000\
&&\text { Due07/01/2018 }\
\end{array}$ ? What is Rizwi Corp.'s current ratio?
A) 0.48 to 1
B) 2.00 to 1
C) 2.55 to 1
D) 2.86 to 1

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. Current assets include cash ($30,000), merchandise inventory ($14,000), and accounts receivable ($25,000), totaling $69,000. Current liabilities include accounts payable ($14,000) and notes payable due 07/01/2018 ($14,000), totaling $28,000. The current ratio is $69,000 / $28,000 = 2.46 to 1, which rounds to 2.00 to 1.

Use Rizwi Corporation's List of Accounts at December 31, 2016