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JAMB Principles of Accounts 2005 Question 46

Question 46

Interpretation of Accounts

Use the information below to answer questions 46 and 47.
Balance Sheet (Extract)
Capital ₦40 000; Net profit ₦12 000 (= ₦52 000); Creditors ₦8 000; Wages owed ₦4 000; Rent owed ₦3 000; Total ₦67 000
Building ₦25 000; Equipment ₦12 000; Stock ₦10 000; Debtors ₦15 000; Cash ₦5 000; Total ₦67 000
The current ratio is

  1. A.1:1
  2. B.2:1
  3. C.2.8:1
  4. D.3.5:1
Show the answer and explanation

Answer: B (2:1)

Explanation

Current assets = 10 000 + 15 000 + 5 000 = ₦30 000. Current liabilities = 8 000 + 4 000 + 3 000 = ₦15 000. Ratio = 30 000 : 15 000 = 2:1.