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:
A) $70,000
B) $100,000
C) $49,000
D) $125,000

Question

Quizplus · Accepted Answer

Current assets = Quick assets + Inventory
Current assets = Quick assets + $49,000
Acid-test ratio = Quick assets ÷ Current liabilities
2.8 = Quick assets ÷ Current liabilities
Quick assets = 2.8 × Current liabilities
Current ratio = Current assets ÷ Current liabilities
3.5 = Current assets ÷ Current liabilities
3.5 = (Quick assets + $49,000) ÷ Current liabilities
3.5 = [(2.8 × Current liabilities) + $49,000] ÷ Current liabilities
3.5 = 2.8 + ($49,000 ÷ Current liabilities)
3.5 - 2.8 = $49,000 ÷ Current liabilities
0.7 = $49,000 ÷ Current liabilities
Current liabilities = $49,000 ÷ 0.7 = $70,000

The Seabury Corporation Has a Current Ratio of 3