Answer (B) is correct . Both the current ratio and quick ratio are given. The only difference between these two ratios is that inventory is included in the calculation of the current ratio, but not the quick ratio. The current ratio equals current assets divided by current liabilities. The current ratio is 1.4 times the current liabilities. Thus, current assets must be $630,000 ($450,000 × 1.4). The quick ratio is .86 [(current assets – merchandise inventory) ÷ current liabilities of $450,000]. Quick assets are $387,000 ($450,000 × .86). Since the only difference between current assets and quick assets is merchandise inventory (prepaid expenses are immaterial), merchandise inventory must be $243,000 ($630,000
Answer (A) is incorrect because Current assets minus current liabilities is $180,000.
Answer (C) is incorrect because Quick assets equal $387,000.
Answer (D) is incorrect because The current assets equal $630,000.
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Assuming that prepaid expenses are immaterial, White’s ending merchandise inventory is