The balances in the current asset and liability accounts for Virden Ltd. (Virden) are provided below. The
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Required:
a. Calculate Virdens current ratio on December 31, 2018, using the two cost formulas.
b. How do you explain the results you obtained in (a)?
c. How do the different results you obtained in (a) affect your analysis of Virden Ltd.s liquidity?
d. Which current ratio provides the best measure of Virdens liquidity?Explain.
Transcribed Image Text:
Cost formula FIF0 Average cost Inventory balance on December 31,2018 $247,000 229,000 Account Cash Accounts receivable Prepaid assets Bank loan Accounts payable and accrued liabilities Account balance on December 31,2018 $140,000 367,000 25,000 148,000 318,000
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a Cash 140000 Accounts receivable 367000 FIFO Average Prepaid assets 25000 Inventory 247000 229000 O...View the full answer
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