Question 12
Interpretation of AccountsUse the following Balance Sheet:
Ordinary share capital ₦100,000
6% Preference share capital ₦60,000
Reserve ₦20,000
(subtotal ₦180,000)
10% Debentures ₦40,000
Creditors ₦25,000
Accrued Rent ₦3,000
Total ₦248,000
Plant and Machinery ₦60,000
Furniture ₦50,000
Motor Van ₦68,000
Stock ₦14,000
Debtors ₦36,000
Prepayments ₦1,800
Bank ₦18,200
Total ₦248,000
What is the current ratio?
- A.1 : 1
- B.1 : 2
- C.3 : 1
- D.5 : 2
- E.6.8 : 7
Show the answer and explanation
Answer: D (5 : 2)
Explanation
Current assets 14,000 + 36,000 + 1,800 + 18,200 = 70,000; current liabilities 25,000 + 3,000 = 28,000; 70,000 : 28,000 = 5 : 2.