Data from Dunshee Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730. The acid-test ratio at the end of Year 2 is closest to:
A)2.17
B)1.78
C)1.74
D)1.06

Question

Data from Dunshee Corporation's most recent balance sheet appear below:  Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730. The acid-test ratio at the end of Year 2 is closest to:
A)2.17 
B)1.78 
C)1.74 
D)1.06

Quizplus · Accepted Answer

The acid-test ratio is calculated as follows:
Acid-test ratio = (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities

Using the information from the balance sheet:
Cash = $210
Marketable Securities = $0
Accounts Receivable = $250
Current Liabilities = $280

Therefore, the acid-test ratio = ($210 + $250 + $0) / $280 = 1.74

Therefore, the closest option is C) 1.74.

Data from Dunshee Corporation's Most Recent Balance Sheet Appear Below