Answer:
Find the appendix attached:
Current ratio improved in 2018 from 1.83 in 2017 to 2.00 in 2018
Acid test ratio improved in 2018 from 1.10 in 2017 to 1.18 in 2018
The payment of $100 million accounts payable would make current ratio in 2017 improve from 1.83 to 2.03 and in 2018 from 2.00 to 2.25
The payment of $100 million accounts payable would make acid test ratio in 2017 from 1.10 to 1.12 and in 2018 from 1.18 to 1.22
Find computations below.
Explanation:
2018 2017
Current ratio
Current assets/current liabilities
$968,530/$485,221 2.00
$901,229/$493,783 1.83
Current ratio improved in 2018 from 1.83 in 2017 to 2.00 in 2018
2018 2017
Acid test ratio
(Current assets-inventory)/current liabilities
($968,530-$398,213)/$485,221 1.18
($901,229-$358,446)/$493,783 1.10
Acid test ratio improved in 2018 from 1.10 in 2017 to 1.18 in 2018
Impact of $100,000,000 cash used in settling accounts payable:
2018 2017
Current ratio
Current assets/current liabilities
($968,530-$100,000)/($485,221-$100,000) 2.25
($901,229-$100,000)/$493,783-($100,000) 2.03
The payment of $100 million accounts payable would make current ratio in 2017 from 1.83 to 2.03 and in 2018 from 2.00 to 2.25
2018 2017
Acid test ratio
(Current assets-inventory)/current liabilities
($968,530-$398,213-$100,000)/($485,221-$100,000) 1.22
($901,229-$358,446-$100,000)/($493,783-$100,000) 1.12
The payment of $100 million accounts payable would make acid test ratio in 2017 from 1.10 to 1.12 and in 2018 from 1.18 to 1.22
