Question
Please refer to Table 4-2 for the following questions. Table 4-2 Drummond Company Balance Sheet Assets: Cash and marketable securities $400,000 Accounts receivable 1,415,000 Inventories
Please refer to Table 4-2 for the following questions.
Table 4-2 Drummond Company Balance Sheet Assets:
Cash and marketable securities $400,000
Accounts receivable 1,415,000
Inventories 1,847,500
Prepaid expenses 24,000
Total current assets 3,686,500
Fixed assets 2,800,000
Less: accum. depr. (1,087,500)
Net fixed assets 1,712,500
Total assets $5,399,000
Liabilities:
Accounts payable $600,000
Notes payable 875,000
Accrued taxes 92,000
Total current liabilities $1,567,000
Long-term debt 900,000
Common Stock (100,000 shares) 700,000
Retained Earnings 2,232,000
Total liabilities and owner's equity $5,399,000
Net sales (all credit) $6,375,000
Less: Cost of goods sold (4,375,000)
Selling and administrative expense (1,000,000)
Depreciation expense (135,000)
Interest expense (100,000)
Earnings before taxes $765,000
Income taxes (306,000)
Net income $459,000
Based on the information in Table 4-2,
the acid-test ratio is A. 1.39. B. 1.33. C. 1.17. D. 2.15.
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