Asked by Conner Reiss on Jun 02, 2024
Verified
The calendar year-end adjusted trial balance for
Required:
(a)Determine the amounts of current assets and current liabilities.(Note: A $9,000 installment on the long-term note payable is due within one year.)
(b)Calculate the current ratio.Comment on the ability of Blessinger Co.to meets its short-term debts.
Current Assets
Assets expected to be converted into cash, sold, or consumed within a year or the operating cycle, whichever is longer.
Current Liabilities
Short-term financial obligations due within one year or within the normal operating cycle of the business, whichever is longer.
Current Ratio
The current ratio is a financial metric that measures a company's ability to pay short-term obligations with its short-term assets.
- Comprehend the methodology and importance of devising income statements and balance sheets.
- Determine critical financial proportions and elucidate their relevance.
Verified Answer
$112,000 + 27,000 + $15,000 + $9,000 + $3,300 = $166,300
Current liabilities = Accounts Payable + Salaries Payable + Interest Payable + Current Portion of Long-term Debt
$25,800 + 14,500 + $2,500 + $9,000 = $51,800
(b)$166,300/$51,800 = 3.2
Blessinger Co.has a current ratio of 3.2 to 1,which means it has more than three times the current assets as current liabilities.It should have no difficulty paying its short-term debts since cash alone is more than current liabilities.
Learning Objectives
- Comprehend the methodology and importance of devising income statements and balance sheets.
- Determine critical financial proportions and elucidate their relevance.
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