ExpertMedium1 markMultiple Choice
ACCA · Question 64 · Interpretation of financial statements
Scenario: AgriGrow Co trial balance at 30 Sept 20X6: Revenue $2,500,000; Purchases $1,400,000; Opening Inventory $300,000; Trade Receivables $450,000; Trade Payables $200,000; Allowance for receivables (1 Oct 20X5) $20,000; Plant & Machinery Cost $800,000; Acc. Dep (1 Oct 20X5) $320,000. Adjustments: 1. Closing inventory cost $350,000 (includes damaged items cost $50,000, NRV $30,000). 2. P&M depreciation 20% reducing balance. 3. Allowance for receivables adjusted to 5% of receivables. 4. Accrue unpaid electricity $15,000.
What is the Quick Ratio (Acid Test Ratio) for AgriGrow Co? (Round to 2 decimal places)
Scenario: AgriGrow Co trial balance at 30 Sept 20X6: Revenue $2,500,000; Purchases $1,400,000; Opening Inventory $300,000; Trade Receivables $450,000; Trade Payables $200,000; Allowance for receivables (1 Oct 20X5) $20,000; Plant & Machinery Cost $800,000; Acc. Dep (1 Oct 20X5) $320,000. Adjustments: 1. Closing inventory cost $350,000 (includes damaged items cost $50,000, NRV $30,000). 2. P&M depreciation 20% reducing balance. 3. Allowance for receivables adjusted to 5% of receivables. 4. Accrue unpaid electricity $15,000.
What is the Quick Ratio (Acid Test Ratio) for AgriGrow Co? (Round to 2 decimal places)
Answer options:
A.
3.52
B.
2.09
C.
1.99
D.
1.50
How to approach this question
Quick Ratio = (Current Assets - Inventory) / Current Liabilities.
Full Answer
C.1.99✓ Correct
Quick Ratio = (Current Assets - Inventory) / Current Liabilities. Here, it is just Net Receivables / Current Liabilities = $427,500 / $215,000 = 1.988... rounded to 1.99.
Common mistakes
Forgetting to exclude inventory.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
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