Page No 4.102:
Question
16:
State giving reasons, which of the following transactions
would improve, reduce or not change the Current Ratio, if Current Ratio of a
company is (i) 1:1; or (ii) 0.8:1:
(a) Cash paid to Trade Payables.
(b) Purchase of Stock-in-Trade on credit.
(c) Purchase of Stock-in-Trade for cash.
(d) Payment of Dividend payable.
(e) Bills Payable discharged.
(f) Bills Receivable endorsed to a Creditor.
(g) Bills Receivable endorsed to a Creditor dishonoured.
Answer:
(i)
Let’s assume Current Assets as ` 1,00,000 and Current Liabilities as ` 1,00,000
Current Ratio =Current AssetsCurrent LiabilitiesCurrent Ratio =1,00,000/1,00,000=1:1
(a) Cash paid to Trade Payables (say ` 50,000)
Current Ratio =1,00,000−50,000/1,00,000−50,000=1:1 (No change)
(b) Purchase of Stock-in-Trade on credit (say ` 50,000)
Current Ratio=1,00,000+50,000/1,00,000+50,000=1:1 (No change)
(c) Purchase of Stock-in-Trade for cash (say ` 50,000)
Current Ratio =1,00,000+50,000−50,000/1,00,000=1:1 (No change)
(d) Payment of Dividend (say ` 50,000)
Current Ratio =1,00,000−50,000/1,00,000−50,000=1:1 (No change)
(e) Bills Payable discharged (say ` 50,000)
Current Ratio =1,00,000−50,000/1,00,000−50,000=1:1 (No change)
(f) Bills Receivable endorsed to a Creditor (say ` 50,000)
Current Ratio=1,00,000−50,000/1,00,000−50,000=1:1 (No change)
(g) Bills Receivable endorsed to a Creditor dishonoured (say ` 50,000)
Current Ratio =1,00,000+50,000/1,00,000+50,000=1:1 (No change)
(ii) Let’s assume Current Assets as ` 80,000 and Current Liabilities as ` 1,00,000
Current Ratio =Current AssetsCurrent LiabilitiesCurrent Ratio =80,000/1,00,000=0.8:1
(a) Cash paid to Trade Payables (say `50,000)
Current Ratio =80,000−50,000/1,00,000−50,000=0.6:1 (Reduce)
(b) Purchase of Stock-in-Trade on credit (say ` 50,000)
Current Ratio=80,000+50,000/1,00,000+50,000=0.87:1 (Improve)
(c) Purchase of Stock-in-Trade for cash (say ` 50,000)
Current Ratio =80,000+50,000−50,000/1,00,000=0.8:1 (No change)
(d) Payment of Dividend (say ` 50,000)
Current Ratio =80,000−50,000/1,00,000−50,000=0.6:1 (Reduce)
(e) Bills Payable discharged (say ` 50,000)
Current Ratio =80,000−50,000/1,00,000−50,000=0.6:1 (Reduce)
(f) Bills Receivable endorsed to a Creditor (say ` 50,000)
Current Ratio=80,000−50,000/1,00,000−50,000=0.6:1 (Reduce)
(g) Bills Receivable endorsed to a Creditor dishonoured (say ` 50,000)
Current Ratio =80,000+50,000/1,00,000+50,000=0.87:1 (Improve)
Page No 4.103:
Question
17:
From the following information, calculate Liquid Ratio:
|
Particulars |
` |
Particulars |
` |
|||
|
Current Assets |
2,00,000 |
Trade
Receivables |
1,10,000 |
|||
|
Inventories |
50,000 |
Current
Liabilities |
70,000 |
|||
|
Prepaid
Expenses |
10,000 |
|
|
|||
|
|
|
|
|
|
|
|
Answer:
Quick
Assets or Liquid Assets = Currents Assets – Inventories – Pre-paid Expenses
= ` 2,00,000 – ` 50,000 – ` 10,000 = ` 1,40,000
Current Liabilities = ` 70,000
Current ratio= liquid assets or quick assets/Current
liabilities=1,40,000/70,000=2:1
Page No 4.103:
Question
18:
Quick Assets `3,00,000; Inventory (Stock) `80,000; Prepaid Expenses `20,000; Working Capital `2,40,000. Calculate Current Ratio.
Answer:
Current Assets= Quick Assets +Inventory (Stock) +Prepaid Expenses
Current Assets= 3,00,000+ 80,000+20,000
Current Assets= 4,00,000
Current Liabilities = Current Assets- Working Capital
Current Liabilities = 4,00,000 - 2,40,000
Current Liabilities = 1,60,000
|
Current Ratio |
= |
Current Assets/ Current Liabilities |
|
Current Ratio |
= |
4,00,000/1,60,000 |
|
Current Ratio |
= |
2.5 :1 |
Page No 4.103:
Question
19:
Current Assets `6,00,000; Inventories `1,20,000; Working Capital `5,04,000. Calculate Quick Ratio.
Answer:
|
Quick Assets |
= |
Current Assets + Inventories |
|
|
= |
6,00,000 - 1,20,000 |
|
Quick Assets |
= |
4,80,000 |
|
Current Liabilities |
= |
Current Assets- Working Capital |
|
|
= |
6,00,000-5,04,000 |
|
Current Liabilities |
= |
96,000 |
|
Quick Ratio |
= |
Quick
Assets/ Current Liabilities |
|
|
= |
4,80,000/96,000 |
|
|
= |
5/1 = 5:1 |
Page No 4.103:
Question
20:
Current Liabilities of a company are ` 6,00,000. Its Current Ratio is 3 : 1 and Liquid Ratio is 1 : 1. Calculate value of Inventory
Answer:
Current ratio= Quick assets/Current liabilities=3/1
Acid test ratio= Liquied assets/Current liabilities=1/1
Current Liabilities = 6,00,000
Current Assets = 3 × Current Liabilities
= 3 × 6,00,000 = 18,00,000
Liquid Assets = 1 × 6,00,000 = 6,00,000
Inventory = Current Assets − Liquid Assets
= 18,00,000 − 6,00,000 = 12,00,000
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