The current asset section of Stibbe Pharmaceutical Company’s balance sheet included cash of $20,000 and accounts receivable of $40,000. The only other current asset is inventories. The company’s current ratio is 2.0 and its acid-test ratio is 1.5.

Determine the ending balance in inventories and total current liabilities.

Inventories=______

Current Liabilities=________

With I and L denoting, respectively, Inventory and current Liabilities, the problem tells you

\frac{60,000+I}{L}\ =\ 2.0

and

\frac{60,000}{L}\ =\ 1.5

From the second one you can find L, and then use that value for L in the first one to find I.