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JAMB Principles of Accounts 2012 Question 45

Question 45

Interpretation of Accounts

Purchases ₦44,880
Sales ₦85,850
Trade creditors ₦12,250
Trade debtors ₦24,000
Accrued expenses ₦350
Prepaid expenses ₦700
Stock 1/1/2006 ₦25,120
Stock 31/12/2006 ₦27,840
Calculate the acid test ratio.

  1. A.1.94:1
  2. B.1.96:1
  3. C.1:1.94
  4. D.1:1.96.
Show the answer and explanation

Answer: B (1.96:1)

Explanation

Quick assets (no stock) = debtors 24 000 + prepaid 700 = 24 700. Current liabilities = 12 250 + 350 = 12 600. 24 700 ÷ 12 600 = 1.96:1.