[Jindani]

Marketable Securities 100,000
bonds payable, due 1/1/2008 525,000
cash 100,000
equipment 350,000
mortagage payable, due 7/1/2009 750,000
accumlated depreciation-building 200,000
copyright 75,000
capital 800,000
accounts payable 500,000
accumalated depreciation-eqip. 100,000
land 200,000
merchandise inventory 375,000
note payable, due 6/1/2002 250,000
Building 1,000,000
account Receiveable 925,000

Current ratio formula is Current Asset divided by Current Liabilities

Accourding to my calculation, cash+AR+MS+MI divided by AP
100,000+925,000+100,000 +375,000 / 500,000 = 3
Which is the wrong answer. I need help to find out where I'm making a mistake.

[hamzashakaa]

You should divide by 1,025,000 not 500,000 you should include the bonds payable due in 1/1 2008

[Jindani]

One thing I forgot to mentioned it that I have to create a balnace sheet as of Dec 31, 2001.

Still, do you think I should add accounts payable?

[hamzashakaa]

In this case you should divide by the accounts payable and notes payable due in June 2002 (250,000) because it is current payable.

[Jindani]

Accourding to my calculation, cash+AR+MS+MI divided by AP
100,000+925,000+100,000 +375,000 / +250,000+500,000 = 2

SO MY NEW CURRENT RATIO WILL BE 2

[hamzashakaa]

That's it