Excerpts from Colter Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,360 and the cost of goods sold was $810.The current ratio at the end of Year 2 is closest to:
A) 0.44
B) 0.50
C) 1.28
D) 1.23

Question

Excerpts from Colter Corporation's most recent balance sheet appear below:  Sales on account in Year 2 amounted to $1,360 and the cost of goods sold was $810.The current ratio at the end of Year 2 is closest to:
A) 0.44 
B) 0.50 
C) 1.28 
D) 1.23

Quizplus · Accepted Answer

To calculate the current ratio, we need to divide current assets by current liabilities. 
Current assets = cash + accounts receivable = $240 + $300 = $540 
Current liabilities = accounts payable = $420 
Current ratio = current assets/current liabilities = $540/$420 = 1.28

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