Question

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

Answer 1

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

Acid Test Ratio = (Current Assets - Merchandise Inventory) / Current Liabilities
   2.2    = (124 200 - Merchandise Inventory)/46,000

Merchandise inventory = 124 200 - 2.2 * 46,000 = $ 23, 000

Simpler way :

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