Question

A firm
had current liabilities of * 1,25,000. It then acquired stock in trade at a cost of * 25,000 om
credit. After this acquisition, the current ratio was 2 :1. Determine the size of current assets
and working capital after and before the inventories was acquired.

Answer 1

Answer:

Current Ratio = Current AssetsCurrent Liabilities

=Rs300000+Rs20000⋅Rs140000+Rs20000⋅=Rs320000Rs160000=2:1

Purchases of goods of Rs 20000 on credit results in ot increase in stock (i.e Current assets) and creditors(i.e current liabilities )both by" Rs 20000 each