The financial statements for Lexington Service Company include the following items
2017 2016
Cash $52,500 $49,000
Short-term Investments 33,000 20,000
Net Accounts Receivable 52,000 51,000
Merchandise Inventory 160,000 46,000
Total Assets 534,000 553,000
Accounts Payable 129,500 126,000
Salaries Payable 25,000 14,000
Long-term Note Payable 58,000 55,000
Compute the current ratio for 2016. (Round answer to two decimal places.)
A) 1.19
B) 0.84
C) 3.95
D) 6.66
A .A)
Current Ratio = Total current assets / Total current liabilities
Current Ratio = (Cash $49,000 + Short-term Investments $20,000 + Net Accounts Receivable $51,000 + Merchandise Inventory $46,000 ) / (Accounts Payable $126,000 + Salaries Payable $14,000 )
Current Ratio = $166,000 / $140,000
Current Ratio = 1.19
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