Question

Accounts receivable $ 18,000 Long-term notes payable $ 21,000 Accounts payable 11,000 Office supplies 2,800 Buildings 45,000 Prepaid insurance 3,560 Cash 7,000 Unearned services revenue 3,000 Compute Chavez Company's current ratio using the above information.

Answer 1

Answer: 2.24

Explanation:

Current ratio = Current Assets / Current liabilities

Current assets = Accounts receivable + Office supplies + Prepaid insurance + Cash

= 18,000 + 2,800 + 3,560 + 7,000

= $31,360

Current liabilities:

= Accounts payable + Unearned service revenue

= 11,000 + 3,000

= $14,000

Current ratio = 31,360 / 14,000

= 2.24