Smith Corporation Has Current Assets of $11,400, Inventories of $4,000

question 110

Multiple Choice

Smith Corporation has current assets of $11,400, inventories of $4,000, and a current ratio of 2.6. What is Smith's quick or acid test ratio?

• A) 1.69
• B) 0.54
• C) 0.74
• D) 1.35

---

Definitions:

Uncollectible Accounts

Refers to receivables that a business has determined are unlikely to be collected due to customer default.

Aging

A method used in accounting to categorize a company's accounts receivable according to the duration of time an invoice has been outstanding.

Allowance Account

An account used to reduce the carrying amount of accounts receivable or loans to their net realizable value, reflecting expected losses due to uncollectibility.

Aging

A method used to categorize accounts receivable based on the length of time an invoice has been outstanding.