A Company Has the Following Accounts

question 99

Multiple Choice

A company has the following accounts.What is the acid test ratio?

• A) 4.50%
• B) 2.30%
• C) 1.75%
• D) 4.00%
• E) 1.50%

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Definitions:

Beginning Inventory

The value of inventory on hand at the start of an accounting period, consisting of raw materials, work-in-process, and finished goods.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as the sum of beginning inventory plus purchases minus cost of goods sold.

Raw Materials Production Needs

The essentials and quantities of raw materials required to fulfill the production schedule for goods.

Raw Material Purchases

The total cost of materials bought that are intended to be used in the production of goods.