For the FY 2018, Dorchester Company's balance sheet included the following current items: cash $27,000, accounts receivable $121,000, inventories $115,000, prepaid expenses $21,000, accounts payable $62,000, and accrued expenses $59,000

Accounting Oct 12, 2020

For the FY 2018, Dorchester Company's balance sheet included the following current items: cash $27,000, accounts receivable $121,000, inventories $115,000, prepaid expenses $21,000, accounts payable $62,000, and accrued expenses $59,000. Use this information to determine the Current Ratio. (Round & enter your answers to one decimal place.)

Expert Solution

Computation of Current Ratio:

Current Ratio = Current Assets / Current Liabilities

Here,

Current Assets = Cash + Accounts Receivables + Inventories + Prepaid Expenses = $27,000+$121,000+$115,000+$21,000 = $284,000

Current Liabilities = Accounts Payable + Accrued Expenses = $62,000+$59,000 = $121,000

Current Ratio = $284,000 / $121,000 = 2.35

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