Answer (D) is correct . The current ratio equals current assets divided by current liabilities. Current assets consist of cash, accounts receivable, inventory, and prepaid expenses, a total of $1,480,000 ($400,000 + $200,000 + $800,000 + $80,000). Current liabilities consist of accounts payable, interest payable, and notes payable, a total of $280,000 ($160,000 + $20,000 + $100,000). Hence, the current ratio is 5.29 ($1,480,000 ¡Â $280,000).Answer (A) is incorrect because The figure of 1.68 includes long-term bonds payable among the current liabilities.
Answer (B) is incorrect because The figure of 2.14 is the quick ratio.
Answer (C) is incorrect because The figure of 5.00 excludes prepaid expenses from current assets.
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