Use the information in the adjusted trial balance presented below to calculate the current ratio for Taron Company:
$\begin{array}{lrr}
\text {Account Title}&\text {Dr.}&\text {Cr} \
\text { Cash } & \$ 23,000 \
\text { Accounts receivable } & 16,000 \
\text { Prepaid insurance } & 6,600 \
\text { Equipment } & 100,000\
\text { Accumulated depreciation-Equipment } & & \$ 5,000 \
\text { Land } & 95,000 & \
\text { Accounts payable } & & 17,000 \
\text { Interest payable } & & 2,400 \
\text { Unearned revenue } & & 5,000 \
\text { Long-term notes payable } & & 30,000 \
\text { Retained earnings } & & 136,200 \
\text { Totals } & \$ 240,600 & \$ 240,600
\end{array}$
A) 1.87.
B) .54.
C) 3.92.
D) 1.77.
E) 1.60.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Current assets include cash, accounts receivable, and prepaid insurance. Current liabilities include accounts payable, interest payable, and unearned revenue. In this case, current assets total $45,600 ($23,000 + $16,000 + $6,600) and current liabilities total $24,400 ($17,000 + $2,400 + $5,000). Therefore, the current ratio is $45,600 / $24,400 = 1.87.

Use the Information in the Adjusted Trial Balance Presented Below