Question

Alice company has a current ratio of 2.7. the acid test ratio is 2.2. the current liabilities of the Alice Company are $46,000. Calculate the dollar amount of the merchandise inventory?

Answer 1

Current Ratio = 2.7              Acid test ratio or quick ratio = 2.2
Current liabilities = $ 46, 000


Current Ratio = Current Assets / Current Liabilities 
Current Assets = 2.7  *  $46,000 = $124 200.

Acid Test Ratio = (Current Assets - Merchandise Inventory) / Current Liabilities

Merchandise Inventory = (Current Ratio - Acid Test Ratio) * Current Liabilities
               = 0.5 * $ 46, 000 = $ 23, 000