Excerpts from Shelton Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,320 and the cost of goods sold was $890.
-The current ratio at the end of Year 2 is closest to:
A) 0.43
B) 0.85
C) 2.19
D) 0.36

Question

Excerpts from Shelton Corporation's most recent balance sheet appear below:  Sales on account in Year 2 amounted to $1,320 and the cost of goods sold was $890.
-The current ratio at the end of Year 2 is closest to:
A) 0.43 
B) 0.85 
C) 2.19 
D) 0.36

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities.

Current assets at the end of Year 2:
Cash + Accounts receivable = $470 + $244 = $714

Current liabilities at the end of Year 2:
Accounts payable + Accrued expenses + Deferred revenue = $340 + $48 + $258 = $646

Current ratio = Current assets / Current liabilities = $714 / $646 = 1.10

Therefore, the closest answer choice is C) 2.19.

Excerpts from Shelton Corporation's Most Recent Balance Sheet Appear Below