Current Assets for Distributions Inc

question 162

Multiple Choice

Current assets for Distributions Inc.are $260,000 and total assets are $600,000.Current liabilities are $170,000 and total liabilities are $300,000.Included in the current assets are merchandise inventory and prepaid expenses of $25,000 and $15,000,respectively.What is the acid-test ratio?

• A) 1.15
• B) 0.87
• C) 1.53
• D) 1.29

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Definitions:

Avoidable Cost

Costs that can be eliminated if a particular decision is made, such as discontinuing a product or service.

Sunk Cost

A cost that has already been incurred and that cannot be changed by any decision made now or in the future.

Consistency

Refers to the accounting principle that mandates the same accounting methods and procedures to be followed from one financial period to another to ensure comparability of financial statements over time.

Relevant

Pertaining to something that is closely connected or appropriate to the matter at hand, often used in decision-making to determine if information should be considered.