ACCA · Question 58 · Interpretation of financial statements

Section B - Case 2: Single Entity Accounts & Ratio Analysis

*Scenario: Horizon Wind Farms Ltd has prepared draft financial statements for the year ended 31 December 20X8. The draft net profit is $850,000. Draft Revenue is $4,000,000 and Cost of Sales is $2,200,000. The following adjustments have not yet been processed:

1. Depreciation on new turbines of $50,000 was omitted.
2. An annual insurance premium of $12,000 paid on 1 July 20X8 was expensed in full.
3. Closing inventory was overvalued by $30,000.
4. An irrecoverable debt of $15,000 needs to be written off.
   Equity comprises Share capital $1,000,000 and Retained earnings $2,000,000. There is a long-term loan of $1,500,000.*

If the adjusted Current Assets are $761,000 and the adjusted Current Liabilities are $380,500, what is the Current Ratio?