Peartree Company Provides the Following Data How Much Is the Current Ratio at Year-End 2014?
A)

question 109

Multiple Choice

Peartree Company provides the following data:
$\begin{array}{|l|r|r|}\hline \text { BALANCE SHEET } & \text { Dec } 31,2014 & \text { Dec } 31,2013 \\\hline \text { Cash } & \$ 21,000 & \$ 18,000 \\\hline \text { Accounts receivable, net } & 31,000 & 35,000 \\\hline \text { Inventory } & 53,000 & 25,000 \\\hline \text { PP\&E, net } & 120,000 & 90,000 \\\hline \text { Total assets } & \$ 225,000 & \$ 168,000 \\\hline\\\hline \text { Accounts payable } & \$ 4,000 & \$ 6,000 \\\hline \text { Accrued liabilities } & 2,000 & 1,000 \\\hline \text { Long-term notes payable } & 84,000 & 90,000 \\\hline \text { Total liabilities } & \$ 90,000 & \$ 97,000 \\\hline\\\hline \text { Common stock } & \$ 30,000 & \$ 2,000 \\\hline \text { Retained earnings } & 113,000 & 74,000 \\\hline \text { Treasury stock } & (8,000) & (5,000 ) \\\hline \text { Total stockholders' equity } & \$ 135,000 & \$ 71,000 \\\hline \begin{array}{c}\text { Total liabilities and } \\\text { stockholders' equity }\end{array} & \$ 225,000 &\$168,000 \\\hline\end{array}$
How much is the current ratio at year-end 2014?

• A) 17.5
• B) 16.1
• C) 3.5
• D) 0.5

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Definitions:

Operating Reserves

Financial assets set aside by an organization to cover unexpected shortfalls or emergencies, ensuring financial stability and operational continuity.

Permanently Restricted Endowment

A type of endowment fund that a donor restricts in perpetuity; the principal cannot be spent, but the investment earnings can be used for designated purposes.

Financial Assets

Assets that derive value because of a contractual claim, such as stocks, bonds, and bank deposits.

Physical Assets

Tangible or material assets owned by an individual or company, such as buildings, machinery, or land.