Answer (C) is correct . The current ratio is the ratio of current assets to current liabilities. Since the current ratio and current liabilities are known, current assets can be determined as follows: Current assets ¡Â Current liabilities = Current ratio Current assets ¡Â $600,000 = 3.5 Current assets = $600,000 ¡Á 3.5 = $2,100,000 Quick assets can be determined similarly: ? Quick assets ¡Â Current liabilities = Acid test ratio Quick assets ¡Â $600,000 = 3.0 Quick assets = $600,000 ¡Á 3.0 = $1,800,000 Assuming the company had no prepaid expenses, the difference between current assets and quick assets is inventor
Answer (A) is incorrect because Doubling, rather than averaging, beginning and ending inventory results in $1,600,000.
Answer (B) is incorrect because Using ending, rather than average, inventory results in $2,400,000.
Answer (D) is incorrect because Summing, rather than averaging, beginning and ending inventory results in $6,400,000.
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