Ben Company has the following data for the year just ended:
$\begin{array}{|l|r|}
\hline \text { Cash } & \$ 42,000 \
\hline \text { Accounts Receivable } & \$ 28,000 \
\hline \text { Inventory } & \$ 35,000 \
\hline \text { Current Ratio } & 2.4 \text { to } 1 \
\hline \text { Acid-Test Ratio } & 1.6 \text { to } 1 \
\hline
\end{array}$
What were Ben Company's current liabilities?
A) $35,000.
B) $43,750.
C) $50,400.
D) $63,000.

Question

Quizplus · Accepted Answer

To find the current liabilities, we can use the given current and acid-test ratios. The current ratio is calculated as Current Assets / Current Liabilities. Given a current ratio of 2.4 to 1, we can set up the equation (Cash + Accounts Receivable + Inventory) / Current Liabilities = 2.4. Plugging in the values: ($42,000 + $28,000 + $35,000) / Current Liabilities = 2.4. This simplifies to $105,000 / Current Liabilities = 2.4. Solving for Current Liabilities gives us $105,000 / 2.4 = $43,750.

Ben Company Has the Following Data for the Year Just