Please refer to Table 4-4 for the following questions.
Table 4-4
Wes Donnell, Inc.
Balance Sheet

-In addition to the information contained in Table 4-4,you know that the current ratio for 2010 is 4 and that the corporation paid $11,600 in dividends in 2010.What is Wes Donnell's cash balance for 2010?
A) $2,500
B) $13,600
C) $4,000
D) $6,500

Question

Please refer to Table 4-4 for the following questions.
Table 4-4
Wes Donnell, Inc.
Balance Sheet
 
-In addition to the information contained in Table 4-4,you know that the current ratio for 2010 is 4 and that the corporation paid $11,600 in dividends in 2010.What is Wes Donnell's cash balance for 2010?
A) $2,500 
B) $13,600 
C) $4,000 
D) $6,500

Quizplus · Accepted Answer

To calculate Wes Donnell's cash balance for 2010, we need to use the formula:
Cash = Current Assets - Non-Cash Current Assets
From the balance sheet, we can see that the current assets for 2010 are $76,000, and the non-cash current assets are $44,000. So,
Cash = $76,000 - $44,000 = $32,000
Next, we need to adjust for the dividend payment of $11,600. This reduces the cash balance to:
Cash = $32,000 - $11,600 = $20,400
Finally, we need to divide this by the current ratio of 4 to get the cash balance alone:
Cash = $20,400/4 = $5,100
So, the closest option to the calculated cash balance is C) $4,000.

Please Refer to Table 4-4 for the Following Questions