The following information relates to Woolf Unlimited for the past two years. What is the acid-test ratio for the current year?

Question

The following information relates to Woolf Unlimited for the past two years.  What is the acid-test ratio for the current year?

Quizplus · Accepted Answer

To calculate the acid-test ratio, we use the formula: (Current Assets - Inventory) / Current Liabilities. 
From the given table, we have: 
Current Assets = 1,423,000 
Inventory = 382,000 
Current Liabilities = 1,575,000

Substituting in the formula, we get: 
Acid-Test Ratio = (1,423,000 - 382,000) / 1,575,000 
= 1,041,000 / 1,575,000 
= 0.66

Therefore, the acid-test ratio for the current year is 0.66, which corresponds to option C (0.78 is incorrect as it is the acid-test ratio for the previous year).

The Following Information Relates to Woolf Unlimited for the Past